appeal no. 170 of 2010
TRANSCRIPT
BEFORE THE APPELLATE TRIBUNAL FOR ELECTRCITY (APPELLATE JURISDICTION)
Appeal No. 170 of 2010
Dated : 6th May, 2011 Coram; Hon’ble Mr. Rakesh Nath, Technical Member Hon’ble Mr. Justice P.S. Datta, Judicial M`ember In the matter: Madhya Pradesh PowerGeneration Company Ltd, Shakti Bhawan, Vidyut Nagar, Rampur Jabalpur (M.P) 482 008. …Appellant
Versus
1. Madhya Pradesh Electricity Regulatory Commission,
5th floor, Metro Plaza, Shakti Bhawan, Vidyut Nagar, Rampur Jabalpur (M.P) 482 008. 2 Madhya Pradesh Power Trading Company Ltd., Shakti Bhawan, Rampur, Jabalpur- 482 008. 3. Madhya Pradesh Poorv Kshetra Vidyut Vitran Co.Ltd., Shakti Bhawan, Rampur, Jabalpur- 482 008. 4. Madhya Pradesh Madhya Kshetra Vidyut Vitran Co.Ltd., Nishtha Parisar, Govindpura, Bhopal- 462 023. 5. Madhya Pradesh Paschim Kshetra Vidyut Vitran Co.Ltd. GPH Compound, Polo Ground, Indore – 452 002.
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6. Madhya Pradesh Power Transmission Co.Ltd., Block No. 3, Shakti Bhawan, Rampur, Jabalpur- 482 008. 7. Madhya Pradesh State Electricity Board, Shakti Bhawan, Vidyut Nagar, Rampur, jabalpur(M.P) 482 008. 8. Rajasthan Rajya Vidyut Prasaran Nigam Ltd., Vidyut Bhawan, Janpath, Jaipur- 302 005. 9. Uttar Pradesh Power Corporation Ltd., 14th floor, Shakti Bhawan Extn., 14, Ashok Marg, Lucknow 226 001. 10. MSEB (Holding Company) & Maharashtra State Transmission Co.Ltd., C-19, E Block, MSETCL, Prakash Ganga, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 Respondent(s)
Counsel for the Appellant : Mr. M.G. Ramachandran Ms. Sneha Venketaramani Ms. Swapna Seshadri Ms. Ranjitha Ramachandran Counsel for the Respondent: Mr. Sanjay Sen No.1 Ms. Shikha Ohri Ms. Surbhi Sharma Mr. Ashok Upadhyay
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JUDGMENT
HON’BLE MR. JUSTICE P.S. DATTA, JUDICIAL MEMBER
The appeal presents a pure question of law: whether the
Tribunal can give directions to the Madhya Pradesh Electricity
Regulatory Commission to amend, modify or relax any of the
provision of the Madhya Pradesh Electricity Regulatory
Commission (Terms and Conditions for determination of
Generating Tariff) Regulations, 2009 on the alleged ground
that it has been found impossible for the appellant, a
generating company within the meaning of Section 2 (28) of the
Electricity Act,2003 to reach the benchmarks or the yardstick
fixed by the Commission in its said Regulations, 2009, by virtue
of the provisions contained in the said Regulations conferring
power to the Commission to amend the Regulations.
2. Madhya Pradesh State Electricity Board, following the reforms
in the power sector was bifurcated and restructured as a
result of which the function of power generation has been
vested with the appellant. The function of retail distribution of
power has been vested with the respondent No. 3, 4 and 5,
while the function of transmission of power rests with the
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respondent No. 6 ;and respondent No. 2 has been vested with
business of bulk purchase and bulk sale of electricity in the
State of Madhya Pradesh.
3. Respondent No. 8, Rajasthan Rajya Vidyut Prasaran Nigam
Limited, owns 40% share in the Power House -1 of the Satpura
Thermal Power Station at Sarni and 50% share in the Gandhi
Sagar Hydro Station operated by the appellant. The appellant
has 50% share in the Rana Pratap Sagar Hydro Station and
Jawahar Sagar Hydro Station operated by the respondent No.8.
The respondent No.9, Uttar Pradesh Power Corporation Limited
has 50% share in Rajghat Hydro Power Station and the
respondent No. 10 MSEB (Holding Co) & Maharashtra State
Transmission Company Limited has 33% share in the Pench
Hydro Station, both operated by the appellant.
4. To show the details of the generating stations and the age of
each of the stations, the appellant has presented the following
table:
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Sl.No. Generating Stations Date of Commission
Age
1. Amarkantak Thermal Power Station , (ATPS) Power House-1
Unit 1: 1.02.1965 Unit 2: 08.02.1965
45 years (retired on 01.04.2009)
2. Amarkantak Thermal Power Station, (ATPS) Power House-I1
Unit 3: 11.09.1977 Unit 4: 31.03.1978
33 years
3. Amarkantak hermal Power Station, (ATPS) Power House-I1I
Unit 5: 10.09.2009
01 year
4. Satpura Thermal Power Station (STPS) Power House-1
Unit 1: 06.10.1967 Unit 2: 21.03.1968 Unit 3: 14.05.1968 Unit 4: 10.07.1968 Unit 5: 21.03.1970
42 years
5.
Satpura Thermal Power Station (STPS) Power House-II
Unit 6: 27.06.1979 Unit 7: 20.09.1980
30 years
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6. Satpura Thermal Power
Station (STPS) Power House-III
Unit 8: 25.01.1983 Unit 9: 27.02.1984
27 years
7. Sanjay Gandhi Thermal Power Station (SGTPS), Birsinghpur, Power House-I
Unit 1 26.03.1993 Unit 2: 27.03.1994
17 yars
8. Sanjay Gandhi Thermal Power Station (SGTPS), Birsinghpur, Power House-II
Unit 3: 28.2.1999 Unit 4: 23.11.2008
11 years
9. Sanjay Gandhi Thermal Power Station (SGTPS), Birsinghpur, Power House-III
Unit 5: 28.08.2008
02 years
5. The Commission which is respondent No. 1 herein notified the
generation Tariff Regulations, 2009 as aforesaid on 30th April,
2009 setting out norms relating to various components of tariff
determination including normative annual plant availability
factor, gross station heat rate, specific fuel oil consumption,
auxiliary energy consumption, operation and maintenance
expenses and transit and handling losses for coal in the case of
Thermal Power Generation. Prior to the publication of the
notification as aforesaid, the appellant submitted its comments
on the revised Draft Regulations expressing its difficulties on
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the norms proposed for the generating stations on the ground
that they were old and had outlived normal life expectancy.
The appellant was allegedly told by the Commission to file
tariff petition as per the norms approved by the State
Commission in the tariff Regulations and then incorporate the
difficulties faced by the appellant in meeting the norms. Then
the appellant filed a tariff petition being No. 54 of 2009 for
determination of multi year generation tariff for the control
period 2009-2010 to 2011-12. In the said petition the appellant
submitted on the following aspects:
a) Tariff based on the bench marks as approved by the
Commission as per Regulations 2009.
b) Proposed revision of the appellant concerning benchmarks
along with justification
c) Tariff based on the proposed revised benchmarks.
d) Gap analysis of the two sets of tariff elaborated above.
6. In the course of public hearing the appellant reiterated its plea
that the norms set out in the Regulations, 2009 were impossible
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to be met with; as such the Commission should relax the
norms by virtue of the power under Regulation 58 of the Tariff
Regulations, 2009. The Commission then is said to had
observed that as regards the relaxation of the norms sought for
by the appellant, it could be considered in a separate petition
which is why the appellant filed a petition being No. 8 of 2010
seeking relaxation of the operating norms like the ones as
mentioned in the preceding paragraph. In that petition the
appellant provided detailed explanation along with supporting
data to demonstrate the requirement for relaxation of the
operating norms. It was contended that all the units of the
appellant except the Sanjay Gandhi Thermal Power Station at
Birsingpur had outlived their design life of 25 years and unless
major renovation and modernization works were undertaken
there could be no improvement in the performance of these
units. The station-wise status of the renovation and
modernization activities and the constraints faced by the
appellant with respect to each of the stations was also
explained.
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7. The Commission disposed of the petition No. 8 of 2010 which
was filed by the appellant proposing for the relaxation of the
norms by an order dated 26th May, 2010 which is impugned
herein. By the said order which we shall discuss in the sequel,
the commission rejected the petition.
8. The aforesaid order of the Commission is assailed on the
following grounds:
i) The order is a non-speaking one without dealing with specific
aspects.
ii) The order proceeded on the wrong footing that the
performance of the thermal power station of the appellant was
deteriorating from the previous years and no efforts were made
for improvement of the performance by the appellant.
iii) The Commission failed to consider the reasons given by the
appellant which included that the generating stations were old
and most of them had outlived their lives and there could not
be any improvement except through extensive renovation and
modernization.
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iv) The Commission proceeded on the wrong footing that the
appellant was seeking inferior norms during the control period
than the ones which were there in the earlier years.
v) The Commission proceeded on the wrong footing that the
appellant was not showing any commitment for improvement in
the coming years.
vi) The Commission erred in misconstruing the details given and
reaching the conclusion that the appellant was seeking
relaxation even in regard to Sanjay Gandhi Thermal Power
Station which is not quite old. The State Commission has failed
to appreciate the peculiar problem faced by the appellant in the
above station because of non-completion of some of the
facilities of the new plant and the appellant was seeking
relaxation only for the financial year 2009-2010. The Sanjay
Gandhi Thermal Power Station Unit No. 5 for which relaxation
was sought was the first 500 MW plant installed by the
appellant and there was a need for the appellant’s technical
personnel to understand and gain experience for operating
such capacity. The appellant had not sought any relaxation in
respect of the above unit for the financial year 2010-2011
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onwards. The conclusion reached by the State Commission in
regard to the said generating unit is, therefore, without
consideration of the relevant facts pleaded by the appellant.
vii) The State Commission erred in not considering the Plant
Availability/Load Factor achieved by the appellant’s generating
units in the past few years, the data of which was provided in
details by the appellant. The State Commission without
considering the actual Plant Availability/Load Factor achieved in
the past years has determined the norms to be achieved by the
appellant’s generating stations which is approximately 20%
higher than the Plant Availability/Load Factor presently
achieved by these generating units. The State Commission
has failed to appreciate that these generating units of the
appellant are extremely old and have since long outlived their
design life. It was impossible for these units to achieve Plant
Availability/Load Factor at par with the new generating units
unless substantial renovation & modernization activities were
undertaken
viii) The State Commission has failed to appreciate that the
auxiliary energy consumption in a thermal power generating
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station is more like a fixed consumption. When the machines
are running at lower load, the percentage of auxiliary energy
consumed becomes higher. Some auxiliaries are required to
run even when the machines are shut down. Due to the
ongoing renovation & modernization activities, the higher
consumption of secondary oil is inevitable and an improvement
can be expected only after the renovation & modernization
activities are completed.
ix) The State Commission has failed to appreciate that some
generating units of the appellant are designed with dry bottom
ash disposal system and due to this design constraint, these
units have higher specific oil consumption. For example, in the
case of the Satpura Thermal Power Station Phase 1 (5 x 62.5
MW), the State Commission has approved the specific oil
consumption of the order of 2.5 to 3 ml/kWh whereas, even in
the year of best performance the specific oil consumption of the
unit was 5.80 ml/kWh. Thus, even with the best possible
efforts, it is not possible for the appellant to achieve the target
laid down by the State Commission. Thus, the State
Commission has failed to appreciate the design peculiarities
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and the resulting specific oil consumption requirements of these
generating units.
X) The State Commission has failed to appreciate that the
appellant is already applying a system of coal accounting in line
with the system of coal accounting being adopted by other
thermal power stations of both private and public sectors. In
spite of making all possible efforts to minimize the losses, it is
difficult for the appellant to achieve the targets prescribed by
the State Commission for reasons beyond its control
xi) The State Commission has failed to appreciate that losses during
transit and handling of the coal occur due to factors which are
beyond the control of the appellant such as loss of coal
quantity due to fine particles getting blown away due to wind or
washed away during rainy season, spontaneous combustion
causing accumulated heaps of coal to catch fire of their own,
surface moisture getting evaporated due to larger travel
distance and larger exposed surface area and pilferage. The
appellant has adopted the best possible methods to minimize
these losses. It is, however, impossible to completely eliminate
such losses, thereby reducing these losses to an extent
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compliant with the prescribed norms. A substantial amount of
the handling and transit losses occur when the coal is under the
control of the other agencies and the appellant cannot have any
role to reduce these losses without interfering with their
working, which is just not possible. The State Commission has,
therefore, erred in not taking these factors into consideration for
relaxing the stringent norms prescribed to reduce the transit
and handling losses of coal
xii) The State Commission erred in observing that with regard to
hydro generating stations, no exemption can be provided to
the appellant from the operating norms prescribed under the
Tariff Regulations. The declared capacity of the generating
unit may be zero, although the units are ready to run, due to
factors beyond the appellant’s control. The appellant,
therefore, is seeking a relaxation of their applicability to the
appellant’s generating units. The appellant had also sought
clarification from the State Commission regarding the
consideration of these constraints while calculating Plant
Availability Factor vide letter dated 20.1.2010. The State
Commission in its response dated 11.3.2010 has not
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clarified the above specific issues sought by the appellant,
due to which the appellant again wrote a letter dated
03.04.2010 to which no response has been received from
the State Commission till date.
xiii) The State Commission wrongly proceeded on the basis that
the appellant is proposing revision of norms which are more
relaxed than previous submission made on 27.2.2009 and
particularly for FY 2009-10, and that more relaxation of
norms were sought than the norms specified for FY 2008-09
in the earlier Regulations. The State Commission has
further stated that average of operating parameters achieved
since 2003-04 were proposed while there are instances
when better operating parameters have been achieved,
which have been ignored by MPPGCL. The State
Commission has failed to appreciate that it has proposed
operating norms for the control period on the basis of
average of operating parameters achieved during the last 5
years i.e. upto FY 2007-08. However, when the Tariff
Regulations for control period FY 2010-12 were notified in
April 2009 more recent data was available.
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xiv) The State Commission has wrongly concluded that the vision of
the petitioner is quite contrary to the spirit laid down under
Section 5.3 (f) of Tariff Policy. The State Commission has
failed to appreciate that the Central Commission has also
considered average performance for fixing the target of
Central Generating Stations and norms were fixed below the
average to incentivize the generating units to achieve better
operating parameters. Regarding relaxed norms for FY
2009-10, the appellant has also considered the force
majeure conditions regarding shortage of water in the Tawa
lake of STPS, Sarni. Two sets of policies were prescribed
under this section of Tariff Policy namely one for plant
which is performing at close or above the normative level
and for the other stations which are referred to in sections 5
(h) (ii). The section 5 (h) (ii) is regarding the units where
operations were much below the norms for many previous
years. It was recommended that the initial starting point for
determination of revenue requirement should be recognized
at relaxed level and not at a desired level and suitable
benchmarks study may be conducted to establish desired
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performance standard and further, separate studies may be
required for each utility to assess the capital expenditure
necessary to meet necessary service standards. The
appellant had given consent to proposal of the State
Commission for carrying out the independent 3rd party study
for formulation of O & M norms. The study had not been
conducted so far. The appellant has been regularly pursuing
the State Commission for conducting such study to assess
the capability of all plants operated by the Appellant for
providing relaxation.
xv) The State Commission has failed to follow the well settled
principles laid down by this Tribunal in the case of BSES
Rajdhani Power Limited V. Delhi Electricity Regulatory
Commission (2009) ELR APTEL 880; Uttar Pradesh Rajya
Vidyut Utpadan Nigam Limited v. Uttar Pradesh Electricity
Regulatory Commission and Ors. (Appeal No. 129 of 2006)
which deal with the relaxation of norms required to be done in
the context of the old generating stations.
xvI) The State Commission has failed to appreciate that section 5.3
(f) of the Tariff Policy provides that norms should be efficient
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related to past performance capable to achieve and also
considering the latest technological advancement, fuel, vintage
of equipment, nature of operation, level of service to be
provided to the consumers.
xvii) The State Commission has not properly construed Section 6 of
the National Tariff Policy. The Policy further clarifies the
requirement under Section 6.2 (2) as under;
“Power Purchase Agreement should ensure adequate bankable
payment security agreements to Generating Companies. In
case of persisting default in spite of the available payment
security mechanisms like letter of credit, escrow of cash flows
etc. the generating companies may sell to other buyers”
Section 6.2 (3) of the National Tariff Policy further states that-
“3. In case of coal based generating stations, the cost of project
will also include reasonable cost of setting up coal washeries,
coal beneficiation system and dry ash handling & disposal
system”
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There is inadequate supply of coal by Coal India Limited to the
thermal power stations of the appellant and quality of coal is
also deteriorating year after year. The quality of coal supplied
is inferior to the design requirements of the boiler equipments
resulting in higher Heat Rate and inefficient operation
xviii)The State Commission has failed to appreciate that even the
Central Electricity Regulatory Commission determines the
applicable norms and parameters based on actual performance
of the generating stations and not arbitrarily and unilaterally
without regard to the actual performance in the previous years
9. Accordingly, the prayers are following:
a) “Allow the appeal and set aside the order dated
26.05.2010 passed by the Madhya Pradesh Electricity
Regulatory Commission to the extent challenged in the
present appeal.
b) Pass such other Order(s) and this Tribunal may deem
just and proper”
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10. Petition No.8 of 2010 filed by the appellant which is about 388
page petition contains facts and figures station-wise in support
of the prayer for relaxation of norms.
11. Of the ten respondents, it is the State Commission, the
respondent No. 1 alone which has seriously contested the
appeal although no counter affidavit was filed. The respondent
No. 1, of course, filed a written note of submissions in response
to the memorandum of appeal filed by the appellant dealing
with all the points canvassed in the memo of appeal.
12. The contentions of the respondent No.1in response to the
memorandum of appeal are as follows:-
a) Since the Regulations 2009 notified by the State
Commission under Section 61 read with Section 181 of
the Electricity Act, 2003 has the force of law, the State
Commission has to determine the tariff in terms of the
said Regulations and not on the basis of statements
made by the appellant in a petition proposing for
amendment of such regulations.
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b) The Commission’s order dated 26th May, 2010 passed in
petition No. 8 of 2010 declining the prayer of the
appellant for amendment of the MYT Regulations,2009
cannot at all be the subject matter of challenge under
Section 111 of the Act.
c) The Tribunal has no authority or jurisdiction to sit on
judgment on the on the legality of the MYT Regulations
which have acquired the status of the law.
d) The appellate power of the Tribunal does not extend to
the examination of vires/ and or the impracticability or
otherwise of the Regulations notified by the Commission,
under Section 111 of the Act. As such, the Tribunal
does not require under the law to ask the Commission to
amend its regulations in the same manner as was
prayed for by the appellant before the Commission.
e) The effect of allowing the present appeal would amount
to holding that the MYT Regulations, 2009 as framed by
the State Commission, which otherwise cannot be set
aside by the Tribunal, shall be amended by the
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Commission meaning thereby what cannot be directly
done by the Tribunal is asked to be done indirectly.
f) Factually, in spite of repeated reminders to the appellant
issued by the Commission to come out with a detailed
renovation and modernization plan the appellant failed
to do so and it miserably failed in managing its affairs in
accordance with the directions issued by the
Commission from time to time and in such circumstance,
the appellant’s asking for amendment of the norms and
guidelines by amending the Regulations to suit its
convenience does not deserve commendation.
g) The respondent No. 1 referred to certain decisions of the
Hon’ble Supreme Court in support of its contentions that
whatever is asked for by the appellant in this appeal in
whatever form it be, is not legally permissible for this
Tribunal to do so because to do so would be usurping
the jurisdiction of the power of judicial review which is
available in ultimate analysis with the High Court. It is
contended that the appellate jurisdiction of this Tribunal
which is vested in Section 111 of the Act does not
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extend to the jurisdiction of questioning for legality of the
Regulations so as to see whether the norms notified in
the Regulations are possible to reach by the appellant
who has exhibited total failure in coming up to the mark
or standard set up by the Commission. The decisions
are (a) West Bengal Electricity Regulatory Commission
V/s Calcutta Electricity Supply Company Ltd. Reported in
(2002) 8 SCC 715, (b) K.S Venkataraman & Co. Pvt.Ltd.
V/s State of Madras reported in AIR 1966 SC 1089 ,(c )
PTC India Ltd. Vs CERC reported in ( 2010 )4 SCC 603,
(d) Narinder Chand Hemraj Vs Lt. Governor of Union
Territory of Himachal Pradesh reported in (1971) 2 SCC
747, Supreme Court Employees Welfare Association Vs
Union of India & another reported in (1989) 4 SCC 187,
(e) .M.U. Sinai Vs Union of India and Ors (1972) 2 SCR
640, (f) Vinod Seth v/s Devinder Bajaj and another
reported in (2010) 8 SCC 1 (g) Padam Sen v/s State of
UP AIR 1219,and (h) Nain Singh V/s. Koonwarjee
reported in (1970) 1 SCC 735.
13. The pleadings of the parties bring us to the following issues:
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a) Is the appeal maintainable in its present form and merit?
b)Whether this Tribunal has jurisdiction to afford relief to the
appellant as was prayed before the Commission under
section 111 of the Electricity Act, 2003?
c)Is the impugned order of the Commission dated 26th May,
2010 passed in petition no. 8of 2010 declining the prayer
of the appellant for amendment of MYT Regulations, 2009
can at all be a subject matter of challenge under Section
111 of the Electricity Act, 2003?
d)Whether the appellate power of the Tribunal can be
extended to the exercise of setting aside MYT
Regulations on the ground of norms set out therein being
impossible to be achieved by the appellant for its
generating station(s)
e)Whether the appellate power of the Tribunal under Section
111 of the Act enables it to direct the Commission to
amend the MYT Regulations?
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f) What is the scope and intent of the provisions of the said
Regulations, 2009 dealing with the ‘power to remove
difficulties’(Regulation 57), ‘power to amend’ (Regulation
58) and inherent power of Commission (Regulation 59) in
the context of the exercise of regulatory power to
determine the tariff for the electricity utilities namely the
generating companies?
g) Whether the exercise or non-exercise of powers by the
State Commission under Regulations 57,58 and 59 is
justiceable under Section 111 of the Electricity Act, and if
so, to what extent and in what manner?
h) Whether the State Commission in exercise or non-
exercise of powers under Regulations 57, 58 or 59 is
required to give a reasoned order in support of its
decision?
i) Whether in the facts and circumstance of the case the
appellant has failed on its part to carry out the R&M
activities in terms of the directions issued by the
Commission so much so that such failure led the
25
appellant to come up before the Commission or before
this Tribunal with prayer for amendment of the
Regulations at a time when the tariff application for
determining the tariff of the appellant is pending for
disposal before the Commission.
14. Though we have framed a number of issues, the pith and
substance of the legal issue is whether this Tribunal has
jurisdiction to enter into the question of validity of the
Regulations. Therefore, we undertake a comprehensive exercise
towards legal examination of the point. The other issue is factual
in this as to whether the norms set up by the Commission are
reasonable in the light of facts and circumstances of the case
and whether the order of the Commission suffers from lack of
reasonableness.
15. Mr. M.G. Ramachandran, learned Counsel for the appellant
relied on a good number of decisions of the Hon’ble Supreme
Court to buttress the point that what is being asked for is not
exactly the amendment of the Regulations by virtue of the
legislative power of the Commission but relaxation of the norms
26
by virtue of the power already vested in the Commission in
Regulations 57, 58 and 59 of the MYT Regulations, 2009.
Regulation 57 deals with power to remove difficulties, regulation
58 deals with power to amend and regulation 59 deals with
inherent power of the Commission. Mr. Ramachandran argues
that each or either of the powers enumerated above is sufficient
for the Commission to afford complete relief to the appellant and
the Commission having failed to do so, it is open to the appellant
to move this Appellate Tribunal under its appellate jurisdiction to
exercise its appellate power under Section 111 of the Act for
asking the Commission to exercise either of the three powers on
the facts and circumstances of the case and in doing so, the
Tribunal will not be traveling beyond its jurisdiction and will not
be traversing the area of the power of judicial review. Since the
tariff determination is an inquisitorial proceeding and not an
adjudicatory proceeding, the appellant did not commit illegality to
move the Commission to exercise its power and the Commission
having failed to do so, the appellant is within its rights to
approach the Tribunal to appeal against the decision of the
Commission which is verily an appealable one under Section
27
111 of the Act. Section 61 of the Act in its 9 clauses with one
proviso makes it clear that the generation of the electricity
should be conducted on commercial principles so as to
encourage the competition, efficiency, economical use of
resources, good performance, optimum investments,
safeguarding of consumers’ interest, recovery of cost of
electricity in a reasonable manner. It is argued that the tariff
determination cannot be such as is dehors section 61; or else it
is liable to struck out. The Regulations, 2009 framed by the
Commission is such that norms set out in Regulation 33 of the
said Regulations are not achievable, yet the Commission
declined to amend the norms. In a cost plus basis tariff
determination, the basic concept is that the generating company
is entitled to all costs and expenses reasonably incurred i.e.
incurred by it in a prudent manner plus a reasonable return on its
investment. Thus, unless there is an imprudence or inefficiency
or similar such factors attributable to its working, the generating
companies should get the cost and expenses incurred and in
addition thereto a reasonable return. In other words, the
generating companies cannot be penalized or punished in the
28
realization through tariff the cost, expense and return to it except
to the extent that any imprudence or inefficiency is attributable to
such generating company. It is contended that it is, however,
well accepted that there cannot be any regulation providing for
various terms and conditions in an absolute manner without the
need to consider exemption, relaxation, deviation, removing
difficulties etc. on an on-going basis. The regulations framed
are for future. The role of the Commission in deciding the tariff is
not adjudicatory in nature, namely, after a dispute having arisen,
the Commission has to decide the dispute on the basis of an
existing rights and obligations of the parties. The Commission
decides on the regulation as applicable during a future period
and, therefore, proceeds on certain assumptions. It is not just
possible to anticipate everything and frame regulations. There
will always be circumstances which may not be envisaged. The
norms and parameters for determination of tariff by the State
Commission are also terms and conditions which cannot be
specified in an absolute manner. There is, therefore, always a
need to exempt or relax or deviate from the terms and
29
conditions. In this connection, Mr. Ramachandran refers to
the decisions in
1) Uttar Pradesh Power Corporation Limited v/s National
Thermal Power Corporation Ltd & Ors (2009)6SCC 235
2) PTC India Limited V. C.E.R.C. , 2010 (4) SCC 603
3) Premium Granites & Anr. V. State of Tamil Nadu & Ors.
(1994) 2SCC 691
4) Hindustan Paper Corporation Ltd. V. Government of
Kerala (1986) 3 SCC 398
5) Hindustan Steels Ltd. V. A.K. Roy, (1969) 3 SCC 513
6) S.N. Mukhrjee V. Union of India (1990) (4) SCC 594
7) State of Karnatka & Anr. Vs V.R. Vivekanand Swamy
and another case [2008(5)SCC 328]
8) Foulkes- Administrative Law, Eighth edition, pg 217
9) Wet Bengal Electricity Regulatory Commission vs. CESC
Limited (2002) 8 SCC 715
30
10) Cellular Operators Assn of India v. Union of India (2003
(3) SCC 186)
11) MaharashtraState Power Generation Co. Ltd. V. M.E.R.C.
& Ors. (2010 ELR (APTEL) 0189)
12) NTPC Ltd. V Madhya Pradesh State Electricity Board
2007 ELR APTEL 7
13) BSES Rajdhani Power Ltd. V. Delhi Electricity Regulatory
Commission (2009) ELR APTEL 880
14) Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited V.
Uttar Pradesh Electricity Regulatory Commission and
Ors. (Appeal No. 96 of 2008)
15) Gujarat State Electricity Corporation Ltd. V. Gujarat
Electricity Regulatory Commission and Ors. (Appeal No.
129 of 2006).
Mr. M.G. Ramachandran also referred to treaties of the (a)
Cases and Materials of Indian Administrative Law by M.P.
Jain (1994Edition Volume I page, 117, (b) de Smith’s-
Judicial Review of Administrative Action, 4th Edition, page
31
285, (c) Bennion on Statutory Interpretation, fifth edition,
Indian reprint, page 90, (d) Hiltaire Barnett-Constitutional
and Administrative Law, first Indian reprint, 1996, page 716
and (e) Bennion on Statutory Interpretation, fifth edition,
Indian reprint, page 142.
16. Factually, it is submitted that the State Commission has failed
to consider the following aspects which have been pointed out
by the appellant herein in petition No. 8 of 2010 in these
words:-
“3.25. In respect of the units of SGTPS Birsingpur, it is
pertinent to mention that in FY 10 there has been acute
shortage of coal. The units were required to be run on partial
loading. Even the new units of 500 MW as also runs on partial
load on this account. This has resulted in reduction of PLF of
the station in FY 10
3.26 Both the units of PH 1 are also older than 15 years and
have been included by CEA in comprehensive R & M works for
implementation during 12th plan. M/s. NTPC (Consultancy
wing) have been approached for preparation of proposal for R
& M scheme of the Unit 1 & 2 on the similar lines of STPS,
32
Sarni. HP Heaters of these two units were not functioning
properly. Towards an effort to improve the efficiency of the
units, they have been procured and replaced in one unit in the
AOH of 2009 and the work of other unit shall be taken up in
AOH of 2010.
3.27 Design Probe- The ABL boilers and BHEL Turbine
combination of units have design deficiency compared to BHEL
Boiler/BHEL Turbine. MPPGCL is operating these units best of
its ability. As per CEA performance review for FY 2003 to FY
2007, the performance of 210 MW Unit-1 & 2 of SGTPS is
superior to all India average PUF of ABL Boiler/BHEL Turbine
sets of 200/210 MW capacity, as shown in the table below:-
Year Plant Utilization Factor (PUF) in (%)- ABL / BHEL make
SGTPS Unit No. 1 SGTPS Unit No.2 All India Average
2002-
03 62.64% 62.57% 50.56%
2003-
04 62.55% 62.92% 61.50%
2004-
05 69.60% 63.22% 63.71%
33
2005-
06 *45.54% 61.77% 65.37%
2006-
07 72.20% 64.34% 63.45%
*The Generator transformer of Unit # 1 failed during this period
resulting in low PUF The comparisons of PUF between
BHEL/BHEL and ABL/BHEL make units as per CEA performance
review for thermal power stations 2006-07 are shown in the table
below:-
Year Plant Utilization Factor (PUF)
BHEL/BHEL ABL/BHEL
2004-05 80.18% 63.71%
2005-06 79.35% 65.37%
2006-07 83.58% 63.45%
34
The State Commission has failed to consider the above design-
deficiency of the Birsingpur unit and has held that as it is a new
unit, there is no justification of the operating norms for the said
unit.
17. With respect to the hydro generating stations operated by the
appellant, the State Commission has failed to consider the
following aspects with respect to the formula prescribed in the
Tariff Regulations for calculating the availability of these stations,
which have been pointed out by the appellant in Petition No. 8 of
2010 in these words:-
“24. On the basis of the provisions in the clause 38 of the Regulation
2009, the PAFM for preceding three months as certified by SLDC in
respect of all the Hydel Power Stations is as detailed below:-
S.No. Hydro Power Station
Monthly %
MAY(WEF 08.05.09)
June July
CUM.
YEARLY (%)
1. Gandhisagar 59.86 25.46 38.82 40.05
2. Pench 29.17 56.75 92.46 61.99
3. Bargi 69.16 43.30 38.32 48.78
35
4 Bansagar-1 96.46 66.03 80.92 80.05
5 Banasagar-II 44.75 43.43 47.42 45.26
6 Banasagar-III 72.36 49.20 60.97 60.03
7 Banasagar-IV 0.00 0.00 0.00 0.00
8 Birsingpur 87.50 96.67 100.00 95.29
9 Rajghat 0.00 0.00 8.60 3.14
10. Madhikheda 0.00 0.00 37.82 13.79
25. As the PAFM is linked with DC, we may achieve zero PAFM
even if machine is ready for generation but could not be run due to
any constraints i.e. restriction on release of water for generation
imposed by WRD or in case reservoir level drops below MDDL at
which generation is not possible or nay other constraints imposed
by local/administrative authorities in which units are not allowed to
run due to local “Mela” or any other problems. This is evident from
the above table that Banasagar-IV HPS Jhinna will get no fixed
charges for the period up to July 2009 whereas Rajghat &
Madhikheda HPS will get no fixed charges for the Month May-09
and June-09 because in these months PAFM of these Power
36
House were zero due to zero DC(no generation was possible due
to reservoir level below MDDL)
26.Further the non-achievement of PAFM shall not be due to poor
performance of plants but due to provisions in respect of
determination of tariff for Hydro Generating Stations. Despite
availability of units / Plants for generation, due to constraints
plants may not achieve normative PAFM & balance 50% fixed cost
shall be recoverable on achieving annual generation equal to
annual design energy. As such despite availability of units / plants
for generation including engagement / availability of staff and all
input required, but due restriction imposed by other agencies on
which MPPGCL has no control, generation from units shall not be
possible and due to zero DC fixed cost shall not be received by
the company”
18. The State Commission is said to have failed to consider the above
aspects and has interpreted the above as a request by the
appellant to issue directions to the local authorities.
.
37
19. Mr. Sanjay Sen, learned Counsel appearing for the Commission
argued that what Mr. Ramachandran has argued has no legal
sanction behind it, and the question would be whether the Tribunal
has jurisdiction under section 111 of the Act to assume the
jurisdiction to direct the Commission for amendment of the
Regulations, 2009 setting up therein certain norms relating to the
principal generating stations which according to the appellant was
not possible to reach but, which according to the Commission was
verily possible. The alleged impossibility on the part of the
appellant arose due to its impossibility to carry out R& M activities
which the Commission has been insisting on for a number of years
by several meetings with the representatives of the appellant
company and through correspondence which have been set out in
the written note of submissions. In the said scenario, it cannot be
said that the appellant was bonafide in moving the Commission
and from the nature of the application being petition No. 8 of 2010
it would appear that it was argued in unambiguous and clear
words to amend its notified Regulations and bring about the
Regulations to suit its purpose which the Commission refused to
do so holding by a reasoned order that it was not agreeable to
38
amend the Regulations because the norms set out in the
regulations were such as were not at all impossible to reach at all,
and the appellant inspite of having been directed to extensively
carry out its renovation and modernization works, it failed to do
so. And, when the appellant failed to do so it came of its own with
a petition for amendment of the Regulations. Even the value of the
performance parameters, are inferior to the norms specified in
Regulation, 2009 for FY 2011-12. The Commission asked the
appellant to clarify certain issues which it failed to do so.
Secondly, it is submitted that what is sought for from the Tribunal
is really exercise of the doctrine of judicial review by asking a
direction to the Commission to invoke its power under Regulation
57, 58 and 59 of the MYT Regulations, 2009 when none of these
regulations is at all applicable to mitigate the alleged hardship of
the appellant; and what is really required for the appellant is
amendment of the regulations which the appellant in fact asked
for in petition No. 8 before the Commission and which it again
asked for through this appeal before this Tribunal which cannot
render any relief. Unless the doctrine of judicial review is
exercised which is really non existent either under the statute or
39
under the Constitution of India, the appellant cannot have any
relief. Therefore, it is submitted that the appeal is not maintainable
under section 111 of Electricity Act, 2003.
20. Having thus recorded the sum total of the submissions of the
learned Counsel for the parties that we proceed to have a critical
appreciation of the issues which can be divided into two parts –
legal and factual ; for the present we will be dwelling upon the
legal issues enumerated above which overlap each other so that
we present herewith a common treatment covering all the legal
issues.
21.Ours is an appellate Tribunal for Electricity set up under Section
110 of the electricity Act,2003 and power and functions of this
Tribunal are dealt with under Section 111 which in essence
provides that it is an appellate authority to examine the orders
passed by adjudicating Officer under the Act(Section 127) or the
orders passed by the Appropriate Commission. The procedure
and power of the Appellate Tribunal are dealt with in Section 120.
The Central Commission and the State Commission pass order
under Part VII of the Act, 2003 which are appealable under section
40
111 of the Act. There is another power of the Tribunal located in
Section 121 according to which this Tribunal may after hearing the
appropriate Commission or any other party, issue such orders and
instructions or directions from time to time to any appropriate
Commission for the performance of its statutory functions under
the Act. In the present appeal, the appellant has not admittedly
asked the Tribunal to exercise this power. The original Section 121
had given the Chairperson of the Tribunal to examine general
power of superintendence and control over the Commission but
now by amendment the section has been the one which we read
just now.
22. The function of the State Commission will be found in Section 86 of
the Act which we reproduce below:
“86. (1) The State Commission shall discharge the following
functions, namely: -
(a) determine the tariff for generation, supply, transmission and
wheeling of electricity, wholesale, bulk or retail, as the case
may be, within the State:
Providing that where open access has been permitted to a
category of consumers under section 42, the State Commission
41
shall determine only the wheeling charges and surcharge
thereon, if any, for the said category of consumers;
(b) regulate electricity purchase and procurement process of
distribution licensees including the price at which electricity
shall be procured from the generating companies or licensees
or from other sources through agreements for purchase of
power for distribution and supply within the State;
(c) facilitate intra-state transmission and wheeling of electricity;
(d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with
respect to their operations within the State;
(e) promote congenration and generation of electricity from
renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person,
and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a
distribution licensee;
(f) adjudicate upon the disputes between the licensees, and
generating companies and to refer any dispute for arbitration;
(g) levy fee for the purposes of this Act;
42
(h) specify State Grid Code consistent with the Grid Code specified
under clause (h) of sub-section (1) of section 79;
(i) specify or enforce standards with respect to quality, continuity
and reliability of service by licensees;
(j) fix the trading margin in the intra-State trading of electricity, if
considered, necessary; and
(k) discharge such other functions as may be assigned to it under this
Act.
(2)The State Commission shall advise the State Government on all or
anyof the following matters, namely :-.
(i) promotion of competition, efficiency and economy in activities of
the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry in the State;
(iv) matters concerning generation, transmission , distribution and
trading of electricity or any other matter referred to the State
Commission by that Government.
(3) The State Commission shall ensure transparency while exercising
its powers and discharging its functions.
43
(4) In discharge of its functions the State Commission shall be guided
by the National Electricity Policy, National Electricity Plan and tariff
policy published under section 3.”
23. In this Connection, we will discuss the provisions of Part IV dealing
with Licensing, Part VII dealing with tariff and Part X dealing with
power and functions of the Commission under this Act.
24. If we analyze different provisions of this Act, which are relatable to
the appropriate Commission it would appear that the regulatory
Commission is a peculiar statutory body having within in itself four
functions, (a) Administrative, (b) Legislative and (c) Judicial and (d)
Advisory . In its administrative jurisdiction, it controls and specifies
the functions of the generating utilities, transmission utilities,
distribution utilities and traders of Electricity. Normally, it does not
have any concern with any individual consumer. Its legislative
function extends to bringing about different types of Regulations
pursuant to the provisions of the Act and to carry out the function
of the Act and its Regulations include determination of terms and
conditions of Tariff Regulations, Conduct of Business Regulation,
MYT Frame Work Regulations, to name a few. It is on the basis of
44
these Regulations that an appropriate Commission determines
tariff of transmission utilities or of distribution utilities and when it
does so it does exercise quasi -legislative power. Under Section
178 of the Electricity Act, 2003, the Central Electricity Regulatory
Commission is vested with the power to make regulations and
regulations framed by them are required to be laid down before
the Parliament under Section 179 which has authority to make
any modification. Similarly, the State Commission has been
vested with the power to make regulations to carry our the purpose
of the Act under Section 181 and all such regulations made by
the State Commission are required to be laid before each House
of the State Legislature, Unicamral or bicameral as the case may
be. The Regulations framed by the State Commission or the
Central Commission do partake the character of subordinate or
delegate legislation under the law and all such subordinate
legislations have the force of the statutory law Therefore, the
regulations framed by an appropriate Commission are deemed to
be legislative enactments having the approval of Legislature when
it is put to use by notification.
45
25. So far as the authority of this Tribunal is concerned, its power or
its limitation has been laid down in the most recent decision of the
Supreme Court namely PTC India Ltd. Vs. CERC reported in
(2010) 4 SCC603. This is a five judge bench decision of the
Supreme Court wherein the question arose as to whether this
Tribunal has jurisdiction under Section 111 and 121 to examine
the validity of the regulations. The Hon’ble Supreme Court held
as follows-
‘’93. For the aforesaid reasons, we answer the question raised
in the reference as follows:
The Appellate Tribunal for Electricity has no jurisdiction to
decide the validity of the Regulations framed by the Central
Electricity Regulatory Commission under Section 178 of the
Electricity Act, 2003. The validity of the Regulations may,
however, be challenged by seeking judicial review under Article
226 of the Constitution of India.
94. Our summary of findings and answer to the reference are
with reference to the provisions of the Electricity Act, 2003.
They shall not be construed as a general principle of law to be
46
applied to Appellate Tribunals vis-à-vis Regulatory
Commissions under other enactments. In particular, we make it
clear that the decision may not be taken as expression of any
view in regard to power of the Securities Appellate Tribunal vis-
à-vis Securities and Exchange Board of India under the
Securities and Exchange Board of India Act, 1992 or with
reference to the Telecom Disputes Settlement and Appellate
Tribunal vis-à-vis Telecom Regulatory Authority of India under
the Telecom Regulatory Authority of India Act, 1997”
26. This decision has also dealt with certain issues which we are
not concerned with. The ratio decidendi of this decision, so far
as the power and functions of the Tribunal is concerned, is very
clear and have been laid down in para 93 and 94 of the
judgment. Therefore, we cannot legitimately do exercise which
is not mandated in Section 111 or 121 of the Act. So far as the
present appeal is concerned, we are faced with the
submissions of the learned Counsel for the appellant that when
a Commission declines to exercise its power to remove
difficulties, or power to relax or when Commission refuses to
exercise its inherent power when exercise of any of such
47
powers was really necessary, then it is within the domain of this
Tribunal to exercise its power under 111 to direct the
Commission to exercise its any of the powers as enumerated
above so much so that the principles laid down in the National
Tariff Policy, National Electricity Policy and provisions of the
Section 61 of the Act are really honored or they are not
honored in breaches.
27. For better appreciation of the position of law, it is worthwhile to
place on record certain factualities and events in chronological
manner.
28. The First Generation Tariff and Annual Revenue Requirements
for the Financial Year 2005-06 based on the tariff application by
the appellant and the Madhya Pradesh State Electricity Board
was published on 25.01.2006. The multi-year tariff framework
order in respect of the appellant for the FY 2006-07, 2007-08
and 2008-09 was notified on 07.03.2006 on the strength of the
petition of the appellant being petition no. 149 of 2005. In the
Generation Tariff Order for FY 2006-07, the Commission gave
the following directions:-
“The Commission again directs the MPPGCL to carry out
necessary R&M Works for improving the performance of its
generating units. MPPGCL may consider phasing out these
48
units if it feels that these units have outlived their economic
life and investment in R & M Work may not yield the desired
results. The Company is directed to submits its proposal in
this regard to the Commission with a detailed cost benefit
analysis within three months of this order.”
29. The Commission paid a visit to Satpura Thermal Power Station
at Sarni and made a report which was forwarded to the
appellants. In the said report dated 30.05.2007 the
Commission inter alia made the following observations:-
“The Commission directs that Company shall file a
comprehensive proposal for R& M of the STPS as per the
Commission’s guidelines for capital expenditure. The
Commission has also noted that power house –I has been
performing quite satisfactorily even though it has completed
more than 37 years of its operation. The Commission directs to
prepare a need based action plan for renovation of this power
house. The Commission has also taken stock of breakdown
and failures in the power station. The Company should file a
detailed analysis of various breakdowns and the remedial
measures undertaken to bring down the avoidable number of
incidence in future********. The Commission directed MPPGCL
to file a detailed report on the performance of the units before
and after AOH/COH. “
49
30. Then on 01.09.2007 the Commission wrote a letter to the
appellant stating inter alia that the compliance report of the
appellant was scrutinized and the Commission directs the
appellant to file a comprehensive compliance report on the
directions of the Commission originally given along with views of
the Commission on the status of the compliance report by
30.09.2007. The direction was that the proposal for R & M of
the STPS would relate to capital expenditure. Then on
11.10.2007 the Commission wrote a letter to the appellant noting
inter alia that the Company had not yet submitted any proposal
for R & M of their own thermal power stations for the appraisal of
the Commission and the Commission’s view was that no R & M
proposal had been submitted to the Commission for appraisal till
date. On 30.11.2007 the Commission again wrote to the
appellant on this subject reiterating virtually what was reapeted in
the letter dated 11.10.2007. On 22.01.2008 the Commission
again wrote regarding the status of the compliance report of
Satpura TPS informing that instructions were issued by the
Commission to send the compliance report by 15.01.2008 but till
date the same could not be received and compliance might be
expedited. Then, on 18.03.2008 the Commission wrote to the
appellant that direction-wise comprehensive impact analysis
report should be submitted by 31.03.2008. Meanwhile, some
NTPC Officers called on the appellant at Jabalpur and visited the
plant and submitted a detailed report comprising
recommendations and the Commission directed the appellant
that the action plan on such recommendations should be
50
submitted by 24.03.2008. Then on 16.05.2008 the Commission
convened a meeting with the officers of the appellant concerning
renovation and modernisation of the thermal power stations at
Satpura and Amarkantak. On 30.05.2008 the Commission wrote
to the appellant to say that a compliance report might be
submitted towards implementation of the recommendations by
M/s. A.F. Ferguson, Action Plan made by M/s. Deolittle Touche
Tohmatsu India Pvt. Ltd., by 15.07.2008. On 03.08.2009 the
Commission wrote to the appellant on Review of Consolidated
Annual Regulatory Compliance Report of MPPGCL for FY 2008-
09 and directed that since no further progress could be observed,
the appellant should submit a detailed report along with time
bound programme for implementing the system. The
Commission also lamented that the appellant was not serious for
developing data based management and management
information system. On 03.09.2008 the Commission wrote to
the appellant to say that true up petition was filed, audited
accounts were submitted, details of the R & M carried out during
the preceding year but R & M scheme should be made a part of
the plan of R & M in respect of the thermal power stations of MP.
On 26.02.2009 the Commission on the subject of filing R & M
proposal and energy audit report by the Company for thermal
power stations of the appellant stated that it was once again
stressed the need for R & M works but the appellant did not file
any proposal under capital expenditure guidelines. Thus, the
Commission drew up a suo motu proceedings being 07 of 2009
directing the appellant to appear in person or through
51
authorized representative in default whereof further action would
be contemplated under the Act. Meanwhile, on 11.11.2008 the
Commission published draft regulation for terms and conditions
for determination of Generation Tariff for the FY 2009-10 to FY
2011-12 on multi year tariff principle basis. On 03.12.2008 the
appellant submitted its comments and suggestions on the draft
regulations. On 11.12.2009 the Commission published a
revised draft of the tariff regulations inviting further comments
and suggestions and on 22.02.2009 and 20.03.2009 the
appellant submitted its comments and suggestions on the
revised draft regulations notified by the State Commission. On
04.03.2009 public hearing was conducted, the appellant
appeared and apprised the Commission about the present
status. On 09.03.2009 the Commission sought for additional
information which the appellant is said to have complied with on
20.03.2009. At the other side hearing on the suo motu petition
being 07 of 2009 took place before the Commission on
25.03.2009 and the Commission passed an order on 15.04.2009
in the matter of filing of R & M proposal and directed that (a) R
& M needs of thermal power stations must be identified within
three months (b) comprehensive project report with detailed cost
benefit analysis be prepared within six months (c) the funding
possibility for R & M projects should be explored (d) necessary
approvals from different agencies might be obtained (e)
specifications/draft NIT parallel for above activities be prepared,
(f) approval as per regulations notified by the Commission should
be obtained and (g) better O & M practices as prevailing in
52
NTPC be adopted. On 30.04.2009 the Commission notified the
M P Electricity Regulatory Commission (Terms and Conditions
for determination of Generation Tariff) Regulations, 2009. On
08.05.2009 the said Regulation was notified in the Government
gazette after final approval. On 02.06.2009 the Commission
notified its order dated 19.05.2009 concerning approval of capital
expenditure towards R & M scheme for STPS Sarni. In this order,
the Commission directed the appellant to submit a report within a
month on 9 points which were put in seriatim at paragraph 10 of
the said order. The questions were very specific and direct. On
03.08.2009 the Commission reviewed the matter and gave
certain directions to carry out R & M in thermal power stations.
On 27.08.2009 a meeting was held between the Commission
and the appellant wherein the appellant expressed its difficulty in
submitting its tariff petition in accordance with the norms
prescribed in the notified regulations. But the Commission
directed the appellant to file the tariff petition in accordance with
the norms prescribed in the tariff regulations. Accordingly, on
28.08.2009 the appellant filed its tariff petition being no. 54 of
2009 in accordance with the tariff regulations for determination of
multi year generating tariff for the period FY 2009-10, 2010-11
and 2011-12. On 05.01.2010 the State Commission held a
public hearing in respect of the petition No. 54 of 2009 wherein
the appellant requested for relaxation of the operating norms
prescribed in the tariff regulations. It is the case of the appellant
that the Commission suggested that a separate petition for
relaxation of the norms might be filed and accordingly on
53
20.01.2010 the appellant filed a petition requesting the
Commission to clarify certain issues regarding fixed charges and
calculation of plant availability factor in respect of hydro
generating units. It is alleged that the Commission did not give
any clarifications for which the appellant again wrote a letter on
03.04. 2010 requesting for clarifications. However, on
25.01.2010 the appellant filed petition no. 08 of 2010 seeking for
relaxation of the operating norms as prescribed in the tariff
regulations. On 16.02.2010 the appellant filed a petition
requesting the Commission to hear both the petitions, namely, 54
of 2009 and 08 of 2010 in a comprehensive manner but the
Commission is alleged to have declined the request. Then came
the impugned order dated 26.05.2010.
31. The above is a brief narration as to how the matter relating to R &
M works and the correspondences between the parties on the
subject went on. According to the Commission, despite
directions from the Commission from time to time the appellant
was lethargic and did not carry out the scheme, while according
to the appellant, as is now canvassed before us, the generating
stations were quite old ones and the appellant faced difficulties in
implementing the scheme.
32. Let us now have a look as to what was actually prayed for before
the Commission by filing the petition no. 08 of 2010. It is a
detailed petition, self-evident and prayers were as follows:-
54
“1Consequent to the implementation of power sector reforms in
the State whereunder amongst others, the activities of
generation, transmission, distribution and retail supply of
electricity carried out by MPSEB have been restructured and
transferred to the six successor corporate entities, the function
of power generation has been vested with MPPGCL. The MP
Tradeco has been vested with the responsibility of Power
trading and MPPGCL is required to sell its entire generation to
MP Tradeco at a rate determined by Hon’ble MPERC.
ii. In view of the above, the petitioner respectfully prays that
Hon’ble Commission may kindly:-
(a) Amend the norms specified in Regulations 2009 [RG- 26 (1)
of 2009] and consider the same as proposed in the para 1 to
36 above.
(b) Condone any inadvertent omissions/errors/short comings
and permit the applicant to add/change/modify/alter this filing
and make further submissions as may be required at later
stages.
(c) Pass such orders as Hon’ble MPERC may deem fit and
proper and necessary in the facts and circumstances of the
case to grant relief to petitioner.”
55
33. To judge as to whether the Commission was justified in
rejecting the petition of the appellant praying for amendment of
the notified Regulations it is most appropriate to quote the
findings of the Commission which are as follows:-
“13.0 Regarding the prayer made by the petitioner for
amendment of the norms specified in the regulation, the
Commission is of the view that the regulations are issued
exercising legislative functions of the Commission of the
Commission given to it under the act and there is no provision
for review. Even otherwise also the petitioner could not satisfy
the Commission on merit warranting further “ In view of the
above, the Commission has observed the following
-
i)The performance of the thermal power stations of MPPGCL
have been deteriorating since past years and no sincere
efforts seem to have been made to arrest such deterioration
what to speak of improvement.
ii)The petitioner has sought relaxation in norms for 2009-10
which are even inferior to the norms for FY 2008-09
prescribed by the Commission in the Regulations for the
earlier control period i.e. FY 2007to FY 2009. It is strange to
note that the petitioner is seeking inferior norms than what
he had in the earlier years. This request is not at all the
spirit of the Electricity Act,2003 and the Tariff Policy notified
by the Government of India.
56
iii) The petitioner has totally relied on its past trend rather than
showing a commitment for improvement in the coming years.
This contention of the petitioner is not tenable since it would
be against the reform process and will burden the
consumers with the cost of the inefficiency at at the
generating end.
iv)The petitioner has also sought relaxation in the operating
norms for the new unit i e., SGTPS 500 MW Birsinghpur
commissioned recently on 28.08.2008 . While the petitioner
has been citing lack of renovation& Modernization of old
units as the main reason for poor performance , the
petitioner’s inability to operate a new unit at the desired and
nationally acceptable level of performance shows that the
problem is much deep and se vere than what has been
made out. Merely showing helplessness and seeking
relaxation is not going to solve the deep rooted problem.
v) On going through the complete petition , it is observed that
the petitioner is seeking relaxation in norms, notified through
a regulation that too far for all the years of the years of the
control period and for all the thermal and hydel generating
units including the new capacities. The complete reading of
the petition indicates that the petition is seeking amendment
to the Regulation 2009 notified by the Commission on 08-
05-2009. The Commission does not find any event or reason
57
which justifies the prayer on merit of this case with adequate
grounds based on occurrences a between the notification of
the regulation and the filing of the petition for relaxation of
operating norms action.
14.0. In view of the above findings, the Commission is of the
view that the petition in not maintainable hence stands
dispose d off.”
34. The above order which is under appeal before us is said to be
non-speaking one as being without any reason and in support of
such contention as this, a decision of the Hon’ble Supreme
Court has been referred to us which we shall place in our
judgement to test the validity of the submission at the appropriate
place.
35. For the present it is necessary for us to study the different
provisions of the Tariff Regulations,2009 in respect of which
amendment is sought for. The Regulations,2009 consists of five
chapters covering 59 regulations of which we quote some of
them as could be seen hereunder for better appreciation of the
case. Mr. Ramchandran submits that he is quite conscious that
this Tribunal does not have the power of judicial review so that
before us he is not challenging the Regulation, nor is he asking
for amendment of the Regulations from the Tribunal; what he is
asking for his client is a direction to the Commission in order that
the Commission may relax the norms /modify the norms to suit
58
the suitability of the appellant in exercise of the power of the
Commission to i)relax, or ii)re move difficulties ,or iii)apply
inherent power .Before we examine the issue we read the
relevant provisions of the Tariff Regulations,2009.
“1.3 These Regulations shall come in force with immediate
effect from the date of their publication in the Official Gazette of
the Government of Madhya Pradesh and unless reviewed
earlier or extended by the Commission, shall remain in force for
a period upto March 2012 from the date of commencement.
Provided that where a Project, including a part thereof, has
been declared under commercial operation before the date of
commencement of these Regulations and whose Tariff has not
been finally determined by the Commission till that date, Tariff
in respect of such Project or such part thereof, as the case may
be, for the period ending 31.3.2009 shall be determined in
accordance with the Madhya Pradesh Electricity Regulatory
Commission (Terms and Conditions for Determination of
Generation Tariff) Regulations, 2005.
2. Scope and extent of application
2.1 These Regulations shall apply in all cases of determination
of Generation Tariff under Section 62 of the Electricity Act,
2003 for supply of electricity to a Distribution Licensee, but shall
not apply where Tariff has been determined through the
59
transparent process of bidding in accordance with the
guidelines issued by the Central Government as per the
provisions of Section 63 of the Electricity Act, 2003.
3. Norms of Operation to be threshold norms
3.1 For removal of doubts, it is clarified that the norms of
operation specified under these Regulations are the threshold
norms and this shall not preclude the Generating Company and
Beneficiaries from agreeing to improved norms of operation and
in such case the improved norms shall be applicable for
determination of Tariff.
6. Principles for Tariff determination
6.1. The Commission, while specifying the terms and conditions
for the determination of Tariff under these Regulations, is
guided by the principles contained in Section 61 of the Act.
6.2. These Regulations intend to encourage Generating
Company to operate on sound commercial principles. The
return on equity allowable to Generating Company shall depend
upon its performance relative to the benchmark levels of the
operating parameters fixed by the Commission. Only prudent
capital expenditure shall be considered for inclusion in the
asset base.
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6.3. The Multi-Year Tariff Principles adopted in these
Regulations seek to promote competition, adoption of
commercial principles, efficient working of the Generating
Company and are based on the Central Electricity Regulatory
Commission (CERC)’s principles. The operating and cost
parameters for the Tariff period have been prescribed after duly
considering the past performance, performance of similarly
placed Units, fuel, vintage of equipments, nature of operation
and capability of achievement in view of past performance for
many years. The allowable Tariffs shall be determined in
accordance with these norms. The Generating Company is
allowed to retain most of the savings as a reward for
performance better than those prescribed in these Regulations.
This is expected to incentivise the Generating Company for
efficient performance and economical use of resources. The
Beneficiaries shall also benefit from the efficient performance
and economical use of resources by the Generating Company
through lowering of Tariffs and improvement in availability and
Plant Load Factor of generating stations.
6.4. Only those investments and capital expenditure that are in
accordance with the guidelines framed by the Commission in
this regard shall be allowed to be recovered through Tariff.
This shall ensure prudent investments by the Generating
Company.
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6.5. The terms and conditions prescribed in these Regulations
are for conventional energy sources.
16. CERC’s Principles
16.1. The Commission, while framing these Regulations has
been guided by the principles and methodologies specified by
the Central Commission (CERC) in its Notification dated
19.01.2009 on terms and conditions of Tariff Regulation, 2009
effective from 1.04.2009.
18. Renovation and Modernisation
18.1. The Generating Company, for meeting the expenditure on
Renovation and Modernization (R&M) for the purpose of
extension of life beyond the Useful life of the generating station
or a Unit thereof, shall make an application before the
Commission for approval of the proposal with a Detailed Project
Report giving complete scope, justification, cost benefit
analysis, estimated life extension from a reference date,
financial package, phasing of expenditure, schedule of
completion, reference price level, estimated completion cost
including foreign exchange component, if any, consent of
Beneficiaries and any other information considered to be
relevant by the Generating Company:
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18.2. Where the Generating Company makes an application for
approval of R&M proposal, the approval shall be granted after
due consideration of reasonableness of the cost estimates,
financing plan, schedule of completion, interest during
construction, use of efficient technology, cost-benefit analysis,
and such other factors as may be considered relevant by the
Commission.
18.3. Any expenditure actually incurred or projected to be
incurred as admitted by the Commission after prudent check
based on the estimates of Renovation and Modernization
expenditure and life extension, and after writing off the original
amount of the replaced assets and deducting the accumulated
depreciation already recovered from the Original Project Cost,
shall form the basis for determination of Tariff.
18.4. The Generating Company in case of thermal generating
station, may, in its discretion, avail of a special allowance either
for a Unit or a group of Units as compensation for meeting the
requirement of expenses including Renovation and
Modernisation beyond the Useful life of the generating station
or a Unit thereof, and in such an event revision of the capital
cost shall not be considered and the applicable operational
norms shall not be relaxed but the special allowance shall be
included in the annual fixed cost :
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Provided further that the option once exercised shall be final and
shall not be allowed to be changed. Provided also that such
option shall not be available for a generating station for which
Renovation and Modernization has been undertaken and the
expenditure has been admitted by the Commission before
commencement of these Regulations, or for a generating station
or Unit which is in a depleted condition or operating under
relaxed operational and performance norms. An appropriate
reduction in NAPAF (Normative Annual Plant Availability Factor)
of such a generating Unit whose R&M proposal is approved by
the Commission as per Regulation 18.1, shall be considered by
the Commission for the Year in which R&M of Unit is undertaken.
However, the operational norms for such generating Unit shall be
reviewed by the Commission keeping in view the objectives of
R&M works. The Generating Company shall file the expected
improvement in norms in its DPR of R&M and the envisaged
improvement in operational norms shall be applicable for that
particular generating Unit after completion of R&M works.
18.5. A Generating Company on opting for alternative option in
Regulation 18.4 of this Regulation shall be allowed special
allowance @ Rs. 5 lakh/MW/Year in 2009-10 and thereafter
escalated @ 5.72 % every Year during the Tariff period in 2009-
12, Unit-wise from the next financial Year from the respective
date of the completion of Useful life with reference to the COD of
respective Units of generating station.
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Provided that in respect of a Unit in commercial operation for
more than 25 Years as on 1.4.2009, this allowance shall be
admissible from the Year 2009-10.
56. Deviation from norms.
56.1. Tariff for sale of electricity by the Generating Company may
also be determined in deviation of the norms specified in these
Regulations subject to the conditions that-
(a) The levelised Tariff over the Useful life of the Project , calculated
based on the discounting factor as notified by the CERC from
time to time for the Projects under Section 63 of the Act, on the
basis of the norms in deviation does not exceed the levelised
Tariff calculated on the basis of the norms specified in these
Regulations; and
(b) Any deviation shall come into effect only after approval by the
Commission, for which an application shall be made by the
Generating Company.
57. Power to remove difficulties
57.1. If any difficulty arises in giving effect to any of the
provisions of these Regulations, the Commission may, by
general or special order, do or undertake or direct the Generating
65
Company to do or undertake things, which in the opinion of the
Commission are necessary or expedient for the purpose of
removing the difficulties.
58. Power to Amend
58.1. The Commission may, at any time add, vary, alter, modify
or amend any provisions of these Regulations.
59. Repeal and Savings
59.1. The Regulations namely “Madhya Pradesh Electricity
Regulatory Commission (Terms and Conditions for determination
of Generation Tariff), Regulations, 2005 (G-26 of 2005)”
published vide Notification No.2932/MPERC/2005 in the Gazette
dated 23/12/2005 and read with all amendments thereto, as
applicable to the subject matter of these Regulations is hereby
superseded.
59.2. Nothing in these Regulations shall be deemed to limit or
otherwise affect the inherent powers of the Commission to make
such orders as may be necessary for ends of justice to meet or
to prevent abuses of the process of the Commission.
59.3. Nothing in these Regulations shall bar the Commission
from adopting, in conformity with the provisions of the Act, a
66
procedure, which is at variance with any of the provisions of this
Regulation, if the Commission, in view of the special
circumstances of a matter or class of matters and for reasons to
be recorded in writing, deems it necessary or expedient for
dealing with such a matter or class of matters.
59.4. Nothing in these Regulations shall, expressly or impliedly,
bar the Commission dealing with any matter or exercising any
power under the Act for which no Regulations have been framed,
and the Commission may deal with such matters, powers and
functions in a manner it thinks fit.”
36. Now we quote some of the provisions of the Act dealing with
Tariff in Part VII which will be relevant for our purpose.
“61. The Appropriate Commission shall, subject to the
provisions of this Act, specify the terms and conditions for the
determination of tariff, and in doing so, shall be guided by the
following, namely:-
(a) the principles and methodologies specified by the Central
Commission for determination of the tariff applicable to
generating companies and transmission licensees;
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
67
(c) the factors which would encourage competition, efficiency,
economical use of the resources, good performance and
optimum investments;
(d) safeguarding of consumers' interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
(g) that the tariff progressively reflects the cost of supply of
electricity and also, reduces and eliminates cross-subsidies
within the period to be specified by the Appropriate
Commission;
(h) the promotion of co-generation and generation of electricity
from renewable sources of energy;
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of
tariff under the Electricity (Supply) Act, 1948, the Electricity
Regulatory Commission Act, 1998 and the enactments
specified in the Schedule as they stood immediately before
the appointed date, shall continue to apply for a period of
one year or until the terms and conditions for tariff are
specified under this section, whichever is earlier.
Determination of Tariff.
68
Determination of tariff by bidding process.
62. (1) The Appropriate Commission shall determine the tariff in
accordance with provisions of this Act for –
(a) supply of electricity by a generating company to a distribution
licensee:
Provided that the Appropriate Commission may, in case of
shortage of supply of electricity, fix the minimum and maximum
ceiling of tariff for sale or purchase of electricity in pursuance of
an agreement, entered into between a generating company and
a licensee or between licensees, for a period not exceeding one
year to ensure reasonable prices of electricity;
(b) transmission of electricity ;
(c) wheeling of electricity;
(d) retail sale of electricity.
Provided that in case of distribution of electricity in the same area
by two or more distribution licensees, the Appropriate
Commission may, for promoting competition among distribution
licensees, fix only maximum ceiling of tariff for retail sale of
electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be
specified in respect of generation, transmission and
distribution for determination of tariff.
69
(3) The Appropriate Commission shall not, while determining the
tariff under this Act, show undue preference to any
consumer of electricity but may differentiate according to the
consumer's load factor, power factor, voltage, total
consumption of electricity during any specified period or the
time at which the supply is required or the geographical
position of any area, the nature of supply and the purpose
for which the supply is required.
(4) No tariff or part of any tariff may ordinarily be amended more
frequently than once in any financial year, except in respect
of any changes expressly permitted under the terms of any
fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating
company to comply with such procedures as may be
specified for calculating the expected revenues from the tariff
and charges which he or it is permitted to recover.
(6) If any licensee or a generating company recovers a price or
charge exceeding the tariff determined under this section,
the excess amount shall be recoverable by the person who
has paid such price or charge along with interest equivalent
to the bank rate without prejudice to any other liability
incurred by the licensee.
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63. Notwithstanding anything contained in section 62, the
Appropriate Commission shall adopt the tariff if such tariff
has been determined through transparent process of bidding
in accordance with the guidelines issued by the Central
Government.
Procedure for tariff order.
64. (1) An application for determination of tariff under section
62 shall be made by a generating company or licensee in
such manner and accompanied by such fee, as may be
determined by regulations.
(2) Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the
Appropriate Commission.
(3) The Appropriate Commission shall, within one hundred and
twenty days from receipt of an application under sub-
section (1) and after considering all suggestions and
objections received from the public,-
(a) issue a tariff order accepting the application with such
modifications or such conditions as may be specified in that
order;
(b) reject the application for reasons to be recorded in
writing if such application is not in accordance with the
71
provisions of this Act and the rules and regulations
made thereunder or the provisions of any other law for
the time being in force:
Provided that an applicant shall be given a reasonable
opportunity of being heard before rejecting his
application.
(4) The Appropriate Commission shall, within seven days
of making the order, send a copy of the order to the
Appropriate Government, the Authority, and the
concerned licensees and to the person concerned.
(5) Notwithstanding anything contained in Part X, the tariff
for any inter-State supply, transmission or wheeling of
electricity, as the case may be, involving the territories of
two States may, upon application made to it by the
parties intending to undertake such supply, transmission
or wheeling, be determined under this section by the
State Commission having jurisdiction in respect of the
licensee who intends to distribute electricity and make
payment therefor:
(6) A tariff order shall, unless amended or revoked, shall
continue to be in force for such period as may be
specified in the tariff order.”
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37. We have quoted some of the provisions of the Regulations of the
State Commission and that of the Act. The Commission is a
creature of the statute and apart from the provisions of the Act
we have quoted, some other provisions of the Act are there
which are located in Part –IV, Part-V and Part-VI of the Act. Part
–IV deals with the licensing, Part –V deals with transmission and
Part-VI deals with distribution of electricity. Generation,
transmission, distribution and trading are the four components of
the electrical system under the Act. If we look at Section 86
which occurs in Part-X of the Act, we can easily find that this
Section which governs the other provisions of the Act so far as
the State Commission is concerned is a conglomeration of
administrative, legislative, judicial and advisory power of the
State Commission. These four jurisdictions are vested with the
Commission which exercises its powers under any of the
jurisdictions in terms of the statute. Following the reforms in the
electricity sector, there has been induction of the private sector in
the electricity business and in terms of the Act, either the Central
Government or the State Government can no longer be identified
with any utilities. Section 108 is a provision giving power to the
State Government to give any direction only in the matter of
policy and that too involving public interest to the Commission,
save which the Commission is statutorily an independent body
vested with the aforesaid jurisdictions, and so far as the Tribunal
is concerned it has jurisdiction to hear appeal against the order of
the Commission that is passed primarily under Part VII of the
Act. The Tribunal vis-à-vis the Commission has no legislative
73
relation to perform. Basically, it exercises judicial function and
that apart there is a provision in Section 121 that gives power to
the Tribunal to issue such orders, instructions or directions to any
appropriate Commission for the performance of its statutory
functions under the Act. Be it noted here that this power is
different from appellate power which is vested in Section 111.
38. We could not be in agreement with Mr. Ramachandran that it is
not a case of direction to the Commission to bring about an
amendment of the notified regulations but it is simply a case
asking the Commission by the Tribunal to relax the norms. It
has to be made clear that it is not a case where we have been
asked to adjudicate upon a tariff determination order in respect of
the generating stations of the appellant for any particular financial
year. So far no tariff order has yet been passed by the
Commission. The tariff application is pending before the
Commission for hearing and disposal, it being application no. 54
of 2009. During the pendency of the tariff determination
application the appellant filed petition no. 08 of 2010 praying for
amendment of the notified Regulations on the ground that the
norms set out in the Regulations were on the part of the
appellant being impossible to reach and that petition has been
disposed of by the Commission through a rejection order on the
grounds which we have set out above. Therefore, before us
there is no concrete case for adjudication in respect of tariff for
the appellant; the Commission has notified its Regulations
dealing with how to determine tariff and a set of parameters has
74
been laid down in respect of the generating stations of the
appellant and we are asked by the appellant to examine whether
the norms fixed by the Commission in the tariff Regulations by
virtue of the legislative power of the Commission were pragmatic
or otherwise so that the Commission could be asked to modify
the regulations in order that the norms may be relaxed to the
advantage of the appellant. We ask ourselves: what is meant
when we say that the Commission should be asked only to
modify the norms ? The relaxation of norms or modification
thereof to the advantage of the appellant irrespective of the
question whether such relaxation or modification would or would
not be justified is possible only when the notified Regulation is
again notified by bringing about an amendment thereof.
Unquestionably, the Commission has power to amend, modify,
rescind or repeal regulation in the same manner as the Central
legislature or State legislature derives its authority from the
Constitution to enact a law, to modify or amend, or rescind or
repeal; and any of these functions falls within the legislative
jurisdiction of the Commission. Therefore, what we are really
asked to do is to direct the Commission to bring out the
amendment of the regulation. When we ask the Commission to
amend its regulations it virtually implies that the regulations
framed by it is deficient, short of achieving its purpose and
defeats the objectives of the Act, the national tariff policy and the
national electricity policy. We do not apprehend that when we
say so nobody will say that we are not exercising the power of
judicial review the very existence of which with the Tribunal has
75
been negated by the decision of the Hon’ble Suprene Court in
the PTC case which we have already noted and which really is
not there in the Act or the Constitution. We cannot conceive of
the source of the power of judicial review in the statute since the
power is a constitutional power that enables a judicial authority
to examine the validity of a legislation or a delegated legislation.
39. Be that as it may, let us examine as to which of the sources of
power, namely, a) power to remove difficulties, b) power to relax
norms, c) exercise of inherent powers and d) power to amend
the regulations apart from the power of Judicial Review will be of
aid to the appellant and in which particular circumstance. Mr.
Ramachandran has taken us to a good number of decisions
which we shall now consider. He has referred to Utter Pradesh
Power Corporation Limited Vs. National Thermal Power
Corporation of India Limited and others reported in (2009) 6 SCC
235. One important observation made at paragraph 56 of the
judgment is that:
“It is now a well settled principle of law that a subordinate
legislation validly made becomes a part of the Act and should be
read as such.”
It has been held that power to regulate may include the power to
grant or refuse to grant a licence, a power to tax or exempt from
taxation, a power to increase tariff or a power to decrease the
tariff having relied on the decision in Hotel & Restaurant
76
Association Vs. Star India Pvt. Ltd., (2006) 13 SCC 753, it was
held the jurisdiction was not only to fix tariff but also laying down
terms and conditions for providing services . In this decision it
was held at paragraph 66 that the jurisdiction of the Appellate
Tribunal is wide, it being an expert Tribunal, and it can interfere
with the finding of the Commission both on fact as also on law. If
we have correctly understood the submission of Mr.
Ramachandran, it would appear that he seeks to stretch to the
point that because of being it an expert Tribunal having appellate
jurisdiction it can direct the Commission to relax the norms, to
amend the Regulations or make an order directing the
Commission to remove the difficulties; and according to Mr.
Ramachandran power to remove difficulties vested with the
Government in a statute is not the same thing as power to
remove difficulties vested in a Commission. To our reasoning,
the appellate jurisdiction of the Tribunal is only exercisable in
terms of the statute that created the Tribunal. Certainly as a first
appellate forum it can examine facts as also the law. The
exercise of the function of the appellate Authority must be within
the domain of the law which has been engrafted in Section 111of
the Act. It is not deniable that the Commission has manifold
powers, namely, administrative, supervisory, legislative and
adjudicatory but each power, according to us, must be exercised
at appropriate field; simply because a Commission has many
powers, it cannot be said that while exercising one power it
oversteps its limit in that power and assumes another jurisdiction.
This was what has been exactly said in WB Electricity
77
Regulatory Commission Vs. CERC reported in (2002) 8 SCC 715
which has also been relied on by Mr. Ramachandran. In this
case, the High Court while hearing appeal in its appellate
jurisdiction vested in the statute, since repealed, exercised the
writ jurisdictional power under Article 226 which was deprecated
by the Hon’ble Supreme Court. What we want to emphasise is
that this Tribunal would exercise power only to the extent as is
conferred on it. There is no difference with Mr. Ramchandran’s
submission that while determining the tariff, the Commission has
to bear in mind the principles laid down in Section 61 and that the
tariff has to be determined on cost plus basis so that a
reasonable return on investment enures to the investors. In this
connection Mr. Ramachandran argued that there cannot be any
regulation providing for various terms and conditions in absolute
manner without exercising discretion like exemption, relaxation,
deviation, removing difficulties etc. Since the power to exercise
all these things or any of them is there in the regulations itself,
we are nobody to question the legitimacy of such provisions
therein.
40. Mr. Ramachandran took us to the recent judgment of the
Hon’ble Supreme Court, namely, PTC India Ltd. Vs. CERC
reported in (2010) 4 SCC 603 . We have earlier noted that one
of the issues which the Hon’ble Supreme Court was invited to
address to was whether Section 121 of the Electricity Act gives
power to the Tribunal to examine validity of a regulation and the
Hon’ble Court had said it can be examined by Judicial Review
78
under Article 226 of the Constitution. Mr. Ramachandran does
not dispute this proposition of law and does not ask us to
exercise any such power which is really not there. Now,
importantly from paragraph 25 onwards of the judgment, the
Hon’ble Supreme Court has observed that the Commission has
many jurisdictions, legislative, advisory, quasi-judicial as vested
in different provisions of the Act. At paragraph 49 of the
judgment, their Lordships have said that decision making and
regulation making functions are both assigned to CERC and
price fixation exercise is really legislative in character unless by
the terms of a particular statute it is made quasi-judicial as in the
case of tariff fixation under Section 62 which is appellable under
Section 111 although Section 61 is an enabling provision for the
framing of regulations by the Commission. At para 52 of the
judgment, their Lordships have observed that a distinction must
be made between delegation of legislative function and
investment of discretion to exercise a particular discretionary
power by a statute. The ruling in this PTC case has been so far
as the instant appeal is concerned is not purely a matter of
academic interest but also decisive.
41. Mr. Ramachandran then took us to the decision in Premium
Granites & Anr. V. State of Tamil Nadu & Ors. (1994) 2 SCC 691,
it was a case where the main question was whether Rule 39 of
the Mineral Concessional Rules is legal and valid. It was struck
down by the Madras High Court, while the Hon’ble Supreme
Court upheld the vires of the rules saying that it does not offend
79
the Act or the Constitution. This Rule 39 dealt with power of
relaxation which has been a matter of concern for the client of
Mr. Ramachandran. Their Lordships held at paragraphs 48, 49,
50 and 51 that power of relaxation as was there in Rule 39 has to
be exercised for mineral development and in public interest after
recording reasons therefor and such exercise of power must
exhibit reasonableness of State action. It was further held that it
is not the domain of the Court to embark upon uncharted ocean
of public policy in an exercise to consider whether the particular
public policy is wise or a better policy can be achieved and such
exercise must be left to the discretion of the executive and the
legislative authorities as the case may be. (Emphasis ours)
According to Mr. Ramachandran, we must ask the Commission
to exercise such power in its legislative jurisdiction because what
was basically prayed before the Commission was to relax the
norms by amendment of the regulations. There cannot be any
second proposition to the proposition of law as laid down by the
Hon’ble Supreme Court. The question whether we would have
legitimacy to ask the Commission to amend the regulation is
exactly the question before us. To our mind this decision does
not help the appellant. If the discretion to relax is not arbitrary, it
cannot be read down. If the discretion is based on reason and
objectivity while refusing to relax the norm yet keeping in mind
the objectives of the Act and the National Tariff Policy then it is
not for the Tribunal to interfere with the discretion and ask the
Commission in exercise of academic pursuit without before us
any order determining tariff application and to substitute the
80
Tribunal’s reason to be the reason of the Commission. This to
our mind is not the ratio decidendi of the decision, on the
contrary the Hon’ble Court held that the Court must not embark
upon the public policy.
42. Mr. Ramachandran then took us to the case of Hindustan Paper
Corporation Limited Vs. Government of Kerala ( 19860 3 SCC
398. This was a case where the question was whether the
power of exemption under Section 6 of Kerala Forest Produce
(Fixation of Selling Price) Act 1976 was ultra vires or not. The
Kerala High Court held it was invalid, but the Hon’ble Supreme
Court ruled in favour of validity. Here it has been observed in
paragraph 9 of the decision that it is well recognized and
constitutionally accepted legislative practice to incorporate
provision conferring the powers of exemption on the Government
in such statutes and such exemption has to be in public interest.
It is not a case before us as to whether the Commission can
exercise any power of exemption nor we are called upon to
examine whether such exemption was rightly granted or not. Be
it noted here that the exemption talked of by the Hon’ble
Supreme Court in the instant case or the relaxation talked of in
the Premium Granite case is exemption or relaxation vested in
the Government but here in the instant appeal before us such
relaxation is asked for to be exercised by the Commission in its
legislative jurisdiction.
81
43. Now Mr. Ramachandran says that in the treatise of the learned
author Mr. M.P. Jain in Cases and Materials on India
Administrative Law – 1994 Edition volume 1, Page 117, there is a
deliberation on removal of difficulty clause. This clause is better
known as Henry VIII clause the necessity of which arises to
remove the difficulties which were not foreseen at the time of
passing the Act, and it is left to the executive to remove any
such. Mr Ramchandran lays emphasis to the sentence where it
has been observed that “ At times, ‘removal of difficulty’ clause
may empower the Government to amend the parent Act or any
other Act with a view to bring the parent Act into full operation .”
It is hardly deniable that a tariff regulations must contain power to
remove the difficulties, to relax, to amend the regulations, to
obviate from the norms and to exercise inherent power if the
facts and circumstances justify exercise any such power.
44 Next we were shown the decision in Hindusthan Steels Ltd. Vs
A.K.Roy, (1969)3 SCC 513 which according to us is totally out
context because whether an Industrial Tribunal while dealing with
a case of termination of an employee from an industrial concern
has power to direct reinstatement or order for compensation, and
the Hon’ble Supreme Court ruled that such discretion can be
exercised by the Tribunal judicially.
45. The principle governing the use of discretion was again
considered in de Smith’ Judicial Review of Administrative
Action,4th. Edition, page285 where it has been observed that the
82
authority in which a discretion is vested can be compelled to
exercise that discretion, but not to exercise it in any particular
manner, and in general a discretion must be exercised only by
the authority to which it is committed.
46. In support of the argument that the Commission while rejecting
the petition for amendment of the Regulations so as to suit the
convenience of the appellant has not assigned any reason for
such rejection Mr. Ramchandran has relied on the authority in S.N.
Mukherjee Vs. Union of India reported in (1990 ) 4 SCC 594 where
it has been held that an administrative authority while exercising
quasi-judicial function must record reason for its decision so that it
could be understood that the Authority has given due
consideration to the points in controversy and that to show clarity
and avoid arbitrariness. We must observe that whether in
ultimate terms we accept the appeal or not, we cannot say that the
order impugned is without any reason. Reasons have been given
which are well understood and it can never be alleged that the
order lacks transparency and objectivity, no matter whether one
agrees to it or not. It is not the requirement of law, as this
decision has held, that as in a Court of law the reason should be
elaborate. Therefore, this decision is of no avail to Mr.
Ramachandra’s client.
47. In State of Karnataka & Anr. Vs. R. Vivekanand Swamy and
Another 2008 (5) SCC 328 the question was of relaxation by the
Government of the medical reimbursement rules in contravention
83
of which a Government employee got himself treated in a hospital
of his own choice which the regulations did not permit but the
Government relaxed the rule to mitigate the exigencies of
circumstances. This decision is of no avail to any of the parties
here. The rider was that such discretion to deviate from the rules
must not be arbitrary.
48.. Mr. Ramchandran rightly submits that if an Authority which is
vested with a discretion does not exercise the discretion, it would
amount to fettering discretion or fettering jurisdiction in support of
which he relies on Foulke’s – Administrative Law, Eighth Edition,
Pg. 217 and Bennion on Statutory Interpretation, Fifth
Edition, Indian reprint Pg. 90. The bottom-line is that if power of
discretion is there, it may be exercised and such exercise must be
judiciously done meaning thereby that power may not be refused
when exercise of such power is warranted.
49. While elaborating this above argument, Mr. Ramachandran refers
to 115 of the Civil Procedure Code, 1908 dealing with revision.
We fail to understand how Section 115 which has drastically been
amended does have any level playing field in the circumstances.
It is the cardinal principle of law that if the Court refuses to
exercise jurisdiction vested in it the Court having power of revision
has to revise the order or when the Court exercises jurisdiction not
vested in it, then also equally the power of revision lies. We are
quite conscious of this position. Now in this connection Mr.
Ramachandran takes us to WBERC Vs. CESC Ltd. (2002) 8 SCC
84
715 where at paragraph 102 of the judgment it was observed that
the Hon’ble Supreme Court felt the necessity of having an expert
body to act like a Tribunal to examine the orders of the
Commission since the matter is technical. This observation of the
Hon’ble Supreme Court has inspired Mr. Ramachandran to say
that the appellate power under Section 111 is no less wider than
the power of judicial review which is exercised under Article 226 of
the Constitution. Respectfully to the learned counsel, we are
unable to concede to this position because in this case itself the
Supreme Court took exception to the manner in which the Calcutta
High Court exercised the power of writ jurisdiction while hearing
appeal under Section 27 of the Electricity Regulatory Commission
Act, 1998. It was observed that the appellate power and the
power of judicial review are distinct. It is important to remember
here that in this decision we have been reminded by the Supreme
Court that there is weighty authority for the proposition that a
Tribunal which is a creature of a statute cannot question the vires
of the provisions under which it functions and quoting the decision
of Dhulabhai Vs. State of M.P. AIR 1969 SC 78 it was held that
challenge to the provisions of a particular act as ultra vires cannot
be brought before the Tribunal constituted under that Act and even
the High Court cannot go into that question on a revision or
reference from the decision of the Tribunals.
50. Mr. Ramachandran himself has cited Hilaire Barnett – Constitutional
and Administrative Law, first Indian reprint, 1996, Pg. 716 wherein
it was observed that judicial review is distinguishable from an
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appeal against a decision. An appeal is made both on the law
and the facts, while judicial review by contrast is concerned with
the manner in which the decision maker has applied the relevant
rules. It has been observed in this book that judicial review
derives from the courts inherent powers to keep decision making
bodies within the bounds of their powers, and to provide remedies
for abuse of power, and its purpose is not to substitute a decision
of the Court for the decision of the administrative body.
51. Again, the learned author Bennion in his treatise on Statutory
Interpretation, 5th Edition, Indian Reprint, Pg. 142 writes that the
distinction between original and appellate jurisdiction is an
important one, while in the former the enforcement agency gives a
decision upon hearing the counsel, while in the latter the body has
to carefully consider the reasons and if it involves an improper
exercise of discretion the appellate body may substitute its own
view. In a word, appellate jurisdiction is a statutory jurisdiction
which is competent to examine both fact and the law but which will
not normally interfere with the exercise of the judges discretion
except, however, on the grounds of law.
52. In Cellular Operators Association of India and Others Vs. Union of
India and Others reported in (2003) 3 Supreme Court Cases 186
the scope and power of the Telecom Regulatory Authority of India
was considered. Mr. Ramachandran interprets this judgment to
say that the Appellate Tribunal for Electricity which is as expert
body as the Appellate Tribunal under Telecom Regulatory
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Authority of India Act, 1997 can exercise so much of power to
make any order while examining legality, propriety or correctness
of a decision or order or direction of a Commission and in that way
it surpasses the power of judicial review. This Tribunal is a
creature of statute as other Tribunals are. Each functions in its
own orbit as defined in the Act creating it. In the Telecom
Regulatory Appellate Tribunal, there is Section 15 according to
which power of that appellate Tribunal has been found by the
Hon’ble Supreme Court to be quite wide as has been indicated in
the statute itself and the decisions of the Supreme Court dealing
with the power of Court exercising appellate power or original
power will have no application for limiting the jurisdiction of the
appellate Tribunal under that Act. But one Hon’ble Judge writing
separate opinion while concurring observed that when jurisdiction
upon a Court or Tribunal is conferred by statute the same has to
be construed in terms thereof and not otherwise, while the power
of Judicial Review of the Supreme Court as also the High Court
stand on a different footing.
53. Now, Mr. Ramachandran refers to five decisions of this Tribunal,
namely, Maharashtra State Power Generation Co. Ltd. Vs.
Maharashtra Electricity Regulator Commission & Ors. (2010 ELR
(APTEL) 0189, NTPC Ltd. S. Madhya Pradesh State Electricity
Board 2007 ELR APTEL 7, BSES Rajdhani Power Ltd. Vs. Delhi
Electricity Regulatory Commission (2009) ELR APTEL 880, Uttar
Pradesh Rajya Vidut Utpadan Nigam Ltd. Vs. Uttar Pradesh
Electricity Regulatory Commission and Ors. (Appeal No. 96 of
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2008) and Gujarat State Electricity Corporation Ltd. Vs. Gujarat
Electricity Regulatory Commission and Ors. (Appeal No. 129 of
2006). In the Maharashtra case, the appellant submitted its
application for approval of ARR and tariff petition for FY 2005-06
and 2006-07. The Commission passed an order determining the
tariff under the tariff regulation and an appeal was preferred
against that order. In course of hearing and disposal, this
Tribunal felt the necessity of an independent study to consider the
operating parameters observing that the Commission has power to
revise the parameters by amending the tariff regulations. Nothing
more was done in that case. The Tribunal did not make any order
directing the Commission to amend the regulations. It simply
directed an exercise of study to examine the feasibility of coming
down from the norms. To our understanding, this decision does
not lay down any proposition of law and the questions we are
confronted with were not posed thereat, and here it is a case
where we are not hearing any appeal against any order
determining tariff; we are called upon to hear an appeal against
alleged insufficiency, incorrectness of the regulations themselves
on the ground that the norms set down there should be amended.
In the NTPC case it was observed at page 293 which is the ratio
decidendi of the case that regulation 13 of the CERC Terms and
Conditions of Tariff Regulations, 2004 empowers the Commission
to vary the provisions of the regulations on its own motion or on an
application made before it as power to relax is there with the
Commission. Notably, in the two cases observations were made
in course of hearing and disposal of the appeals that arose out of
88
orders determining tariff which is not the case with us. In BSES
Rajdhani case, the Tribunal held that the Commission has right to
reconsider the target that has been set and if necessary they may
amend regulation. In Uttar Pradesh Rajya Vidyut Utpadan Ltd
case upon factual analysis direction was made to the Commission
by this Tribunal to re-determine the parameters for the year 2006-
07 and 2007-08 and to undertake study for renovation and
modernisation of older plants. In Gujrat State Electricity
Regulation case, the Tribunal made certain directions to modify
the generation tariff on certain points set out in the body of the
judgment. None of the decisions of this Tribunal which have
been relied upon by the appellant does render any real assistance
to us because in each of the cases the Tribunal felt while hearing
appeal on determination of tariff, which we are not doing, that the
Commission may in consideration of facts and circumstances of
each particular case may go on re-determine tariff after varying
different parameters by undertaking study. In none of the cases
this Tribunal directed any of the Commissions to amend the
regulations so as to suit the parameters of the Generating
Companies.
54. Having studied the decisions relied on by Mr. Ramachandran, we
are to consider whether we should ask the Commission to
exercise the power of removal of difficulties, or to relax or to
amend the regulation or to exercise inherent powers of the
Commission. At the cost of repetition it has to be observed that in
the peculiar situation in which we are beset with if we ask the
89
Commission to exercise the power of removal of difficulty, or to
relax, or to exercise inherent power, we would be directing the
Commission indirectly which we cannot do directly that it should
amend its regulation. What we cannot ask the Commission to do
directly, we cannot ask to do indirectly and it is the place now to
see that as to under what circumstances and in which jurisdictions
the power to remove difficulties or to power to relax or to exercise
inherent jurisdiction can be exercised. The question is whether the
power to remove difficulties can be exercisable in legislative
jurisdiction or the power to relax or the power to exercise the
inherent power to do justice can be exercised in the legislative
jurisdiction. Importantly, what the appellant desires is an order of
the Tribunal so that the Commission in its legislative jurisdiction
exercises legislative power to amend its regulations which power
definitely is there with the Commission, of course.
55. We fail to be in agreement with Mr. Ramachandran when he says
that power to remove difficulties as is ordinarily available in statute
enacted by Parliament is not the same power as the power to
remove difficulties as is there in a regulation available to the
Commission. But Mr. Ramachandran is right when he says that
such power is vested in the Commission to remove anomalies and
difficulties. To our understanding, the exercise to remove
difficulties cannot have different connotation in different statutes or
distinguishable between statute and regulation. If we closely read
Regulation 57 of the MYT Regulations, 2009 we find that power to
remove difficulties which is given to the Commission is basically an
administrative power not a legislative power which the
90
Commission may by general or special order do or undertake or
direct a generating Company to do or undertake things which the
Commission find necessary for the purpose of removing the
difficulty. This power is exercisable only to ensure that the Act is
implemented and it is in furtherance of the Act that the power to
remove difficulties is conferred. It is only to give effect to the
provisions of the regulations that this power is exercised. It has
been rightly argued by Mr. Sanjay Sen, learned Advocate for the
Commission that the power to remove difficulty does not
contemplate removal of hardship that may arise as a result of
giving effect to the regulation. The decision in M.U.Sinai Vs
Union of India (1975) 2 SCR 640 is pertinent. In this decision it
has been held that in order to obviate the necessity of approaching
the legislature for removal of every difficulty encountered in the
enforcement of statute, the legislature some times thinks it
expedient to invest the executive with a very limited power to make
minor adaptations and peripheral adjustments in the statute for
making its implementation effective without touching its substance.
It has been observed that :
“The existence or arising of a difficulty is the sine qua non for the
exercise of power. If this condition precedent is not satisfied as
an objective fact, the power under this clause cannot be invoked
at all. Again, the “difficulty” contemplated by the clause must be
a difficulty arising in giving effect to the provisions of the Act and
not a difficulty arising aliunde, or an extraneous difficulty.
Further, the Central Government can exercise the power under
the clause only to the extent it is necessary for applying or giving
91
effect to the Act etc., and no further. It may slightly tinker with
the Act to round off angularities, and smoothen the joints or
remove minor obscurities to make it workable, but it cannot
change, disfigure or do violence to the basic structure and
primary features of the Act. In no case, can it, under the guise of
removing a difficulty change the scheme and essential
provisions of the Act ”.
56. lf it is a legislative function to remove difficulty like amending
regulation, no direction can be passed by the Tribunal to the
delegated Authority to exercise legislative power. Mr Sanjay Sen,
learned counsel for the Commission takes us to the words of
regulation 57.1 to submit that the power to remove difficulties
which lies with the Commission is exercisable only to give effect
to the provision of the Regulations . Now to direct the generating
company to do or undertake things or itself to do or undertake
by general or special order implies that this power to remove
difficulties is intended to be exercised from the administrative
domain of the Commission instead of exercising the legislative
jurisdiction. Mr. Sen relies on M.U. Sinai V/s Union of India,
(1975) 2 SCR 640 which we have already discussed. It is
submitted by Mr. Sen that before the Commission the appellant
did not rely on this power to remove difficulty clause, what was
prayed for before the Commission was amendment of the
Regulations. It is submitted that no direction can be passed by a
Tribunal to the delegated authority to exercise legislative power
92
57. Mr. Sen relied on the West Bengal Regulatory Commission Vs
CESC (ibid) to argue that the question of vires cannot be argued
before the Tribunal. He refers to the decision of the Honb’le
Supreme Court in Raleigh Investment Co. Ltd. Vs Governor
General in Council reported in ILR(1944)1 Cal 34 , United Motors
(India) Ltd. Vs State of Bombay reported in (1953) 55 ,Bomb. LR
246, M.S.M.M. V/s. Meyyappa Chettiar V. ITO reported in II
(1964)54 ITR I51(Mad) & K.S. Venkatraman & Co. (P) Ltd. Vs
State of Madras(ibid) where it has been held that there is
weighty authority for the proposition that a Tribunal which is
creature of a Statute cannot question the vires of the provisions
under which it functions. Mr. Sen refers to one of our decisions
in Navyeli Lignite Corporation Ltd. Vs Tamil Nadu Electricity
Board and Ors. Where we have observed as follows
“9. In view of the aforesaid decision of the Supreme Court, which
is directly on the point, we have no hesitation in holding that the
Regulations framed under Sections 61 & 178 of the Electricity
Act 2003, are in the nature of subordinate legislation and we
have no jurisdiction to examine the validity of the Regulations in
exercise of our appellate jurisdiction under Section 111 of the Act
of 2003. Even, under section 121, which confers on the Tribunal
supervisory jurisdiction over the Commission, we cannot
93
examine the validity of the Regulations framed by the
Commission, as we can only issue orders, instructions or
directions to the Commission for the performance of its statutory
functions under the Act. It is not a case, where the Commission
has failed to perform its statutory functions. At this stage we may
also refer to the submission of Mr. Reddy that Regulation 16(i)
(c) of the Regulations applies to the appellant alone and
therefore the same cannot be in the nature of subordinate
legislation. It needs to be noted that Sub Clauses (a), (b) and (c)
of Sub Regulation (i) of Regulation 16 apply to various entities.
Regulation 16(i) (c) undoubtedly applies to the appellant alone
but this is in view of the special nature of the generating unit
established by the appellant. It is well settled that a legislation
can be framed for a single unit, entity or a person. The same
principle would apply to the framing of subordinate legislation in
respect of a single unit or entity or body, provided it can be
distinguished from others on the basis of its peculiar or distinctive
features. In any event we are bound by the decision of the
Supreme Court rendered in the West Bengal Electricity Board
case (Supra) as it directly deals with the nature of the
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Regulations notified by the Regulatory Commission in exercise of
its power conferred by Section 58 of the Electricity Regulatory
Commissions Act, 1998, a provision similar to sections 68 and
178 of The Electricity Act, 2003. None of the other decisions
cited at the bar deal with the Regulations framed under the
provisions of the Act of 1998 or the Act of 2003.
.Accordingly, on the first point we hold that the Regulations
framed under Electricity Act 2003, are in the nature of
subordinate legislation and on second point we hold that the
challenge to their validity falls outside the purview of the
Tribunal.”
58. Thus, Mr. Sen submits that since the regulations have the force
of a statute the appellate Court cannot go into the validity of the
regulations. In this connection, Mr. Sen also relied on the
decision in PTC India Ltd. Vs CERC (ibid) which we have
discussed earlier.
59. As regards the regulation 56 dealing with deviation from norms it
is submitted by Mr. Sen that regulation 56 and 56.1 of the MYT
Regulations, 2009 permit deviation from norms only under
95
certain specific circumstances which have been elaborated in the
said provisions. We are in agreement with Mr. Sen that the
deviation from the norms contemplated under the MYT
Regulations, 2009 is only in relation to approval of Tariff under
Section 63 of the Act and the MYT Regulations, 2009 does not
conceive of deviation on any other ground apart from what have
been expressly provided for in the said regulations. We are
simply to observe that if in course of determination of tariff
pursuant to the application filed by the appellant the Commission
would think that the deviation from the norms was necessary
within the parameters as laid down in the regulations it can very
well do so, but for us in course of the present appeal in its
present form and prayer it is quite impossible that this regulation
56 can at all be invoked.
60. As regards power to amend which is given in regulation 58 it is
not deniable that the Commission undoubtedly has that power.
Section 21 of the General Clauses Act clearly provides that
power to issue notification, orders, rules, bye-laws includes a
power exercisable in the same manner to add or amend or vary
96
or rescind. The question is whether we should direct the
Commission to exercise that power. It is not that we are hearing
and disposing of an application for determination of tariff because
such application is yet to be disposed of according to the Tariff
Regulations. What we are asked to do is to direct the
Commission to relax the norms in the MYT Regulations, 2009. It
is not that we are asked to direct the Commission to relax a
particular norms in exigencies of circumstances of a particular
case because in that case the Commission has the power to
deviate from the norms subject to the conditions stipulated in the
Regulations. To direct the Commission to deviate the norms for
particular generating station or stations of the appellant we mean
that such direction is possible so far as the Commission is
concerned to implement only by amendment of the MYT
Regulations. To repeat, it is not a case of prayer for deviation
from norms in a particular situation while keeping the legislation
in tact. Before we are prepared to direct the Commission to
deviate from the norms and that too by amendment of the
Regulations we would be required to observe that the norms or
parameters set out in the Regulations are unjust or improper or
97
illegal so much so that amendment is necessary, which means
that we are travelling beyond our jurisdiction in asking the
legislature to bring about a regulation with amendment so as to
suit the need of the appellant. We are constrained to hold that by
going that path is none else the path of the judicial review
because we are to hold first that the law is deficient, unjust or
unlawful. In this connection, we may refer to the decision in
Narinder Chand Hemraj Vs Lt. Governor- Administrator of the
Union Territory of Himachal Pradesh reported in (1972) 1 SCR
940 wherein it was observed as follows:
“What the appellant really wants is a mandate e from the Court
to the Competent Authority to delete the concerned entry from
the schedule A and include the same in Schedule B. We shall
not go into the question whether the Government of Himachal
Pradesh on its own authority was competent to make the
alteration in question or not. We shall assume for our present
purpose that it had such a power. The power to impose a tax is
undoubtedly is a legislative power. That power can be exercised
by the legislature directly or subject to certain conditions, the
legislator may delegate that power to some other authority. But
98
the exercise of that power whether by the legislature or by its
delegate is an exercise of legislative power. The fact that the
power was delegated to the executive does not convert that
power into an executive or administrative power. No Court can
issue a mandate to a legislature to enact a particular law.
Similarly, no Court can direct a sub-ordinate legislative body to
enact or not to enact a law which it may be competent to enact.
No Court can give a direction to Government to refrain from
enforcing a provision of law.
61. Similarly in Supreme Court Employees Welfare Association &
Ors. v/s Union of India reported in (1989) 4 SCC 187 the same
principle was reiterated in these words “There can be no doubt
that no Court can direct a legislature to enact a particular law.”
Similarly, when a executive Authority exercises a legislative
power by way of subordinate legislation pursuant to the
delegated authority of a legislature, such executive authority
cannot be asked to enact a law which he has been empowered
to do under the delegated legislative authority. On the same
principle it is impossible for the Tribunal to direct the sub
99
ordinate legislative body to amend a subordinate legislation
under Section 111 of the Electricity Act. As we said earlier, what
we could not do directly we could not do indirectly.
62. With regard to exercise of inherent power which we have noticed
in regulation 59.2 it can fairly be stated that this inherent power
which is akin to Section 151 of the Civil Procedure Code is
exercisable only in adjudicatory jurisdiction, not in legislative
jurisdiction. The law is very clear on the subject. In Vinod Seth
v/s Devinder Bajaj & Anr. (2010) 8 SCC 1 the Hon’ble Supreme
Court refers to the decision in Padam Sen Vs. State of U.P.
reported in AIR 1961 SC 218, Manohar Lal Chopra vs Seth Hira
Lal reported in AIR 1962 SC 527, Nain Singh Vs Koonwarjee
reported in (1970) 1 SC 732 and held that Section 151 is
intended to apply where the Code does not cover any particular
procedural aspect, and interest of justice requires the exercise of
power to cover a particular situation. Section 151 is not a
provision of law conferring power to grant any substantive relief.
This power is exercisable not with reference to any matter duly
covered by a statute, nor any such order under inherent
100
jurisdiction can be passed contrary to the provision of the law.
When the law is silent and adjudicatory process demands that a
particular order is necessary to prevent the abuse of the Court
then and then only Court’s inherent jurisdiction expressed in
Section 151 can be invoked. This is the essence of the decisions
quoted above and we find that regulation 59.2 has been drafted
exactly in line with Section 151 of the CPC.
63. It is very well settled that a delegated legislation is open to the
scrutiny of a Court on two grounds, namely a) it violates the
provisions of the Constitution and b) it violates the provisions of
the enabling Act. In the case of alleged violation of the enabling
Act the ground may include not only the cases of violation of the
substantive provision of the Act but also the cases of violation of
the mandatory procedure prescribed. It is Mr. Ramachandran’s
argument that the power of judicial review is not at all required in
as much as what is prayed for is simply deviation from norms as
contained in chapter III , Regulation 33, 34 , 35 and 36 of
Madhya Pradesh Electricity Regulatory Commission(Terms and
Conditions of generation Tariff)(Revision-I) Regulations, 2009
101
(RG-26 I) of 2009), and if the Tribunal find that having regard to
the age of the generating units deviation from norm is required
then it may direct the Commission to do so by amendment. Mr.
Sen for the Respondent No.1 seriously disputes the submission
contending that it has far reaching consequences. Now,
howsoever simplistic the argument of Mr. Ramachandran
appears to be, it has cascading effect in this that in that case
the Tribunal which is mandated to hear appeal only under
Section 111 of the Act and in relation to a particular regulation
either of the Central Commission or State Commission has to
direct that since the regulation fails to achieve the objective of the
Act amendment of the regulation is called and direction has to be
given. In fact, Mr. Ramachandran commenced his argument with
the submission that the aforesaid Regulation, 2009 has not been
framed and enacted in compliance with the provisions of the Act,
particularly Section 61 thereof and accordingly it offends the Act.
The learned Counsel for the appellant brought to our notice a
decision of this Tribunal in appeal No. 36 of 2008 wherein this
Tribunal held as follows:
102
“There is however, no bar on the Commission reconsidering the target and amend the regulation, if necessary. The target for MYT period needs to be set on the basis of losses at the beginning of the MYT period and not on the basis of the loss level on the date of privatization when the policy target period began. The consequences of failure or success in reaching the loss reduction target have already been borne by the licensee. Hence, reference to the initial level of loss at the time of privatization is not necessary. The Commission may itself consider the plea of any amendment in the target set in this regard in case the appellant makes out a case. There fore we direct that the appellant may make an appropriate representation to the Commission in this regard within one month hereof and that if a representation is so made the Commission shall dispose it in two months”
64. This decision was not passed on an appeal wherein challenge
was made to a regulation concerned. The Tribunal was
appropriately hearing an appeal under Section 111 of the Act. The
Tribunal did not give any direction to the Commission to consider
an amendment in positive term. Liberty was given to the appellant
to make a representation and in that case the Commission was
directed to dispose it in two months. Here an appeal has
purportedly been filed before us under Section 111 but the
substance is a challenge to the regulation on the ground that the
norms set out in that regulation was such as would defeat the
object of the Act and hence the Tribunal should direct the
Commission to bring about an amendment.
103
65. Thus, to summarize our reasoning, power to remove difficulties is
a power given to the executive in order that the provisions of the Act
may be given effect to. The Executive may exercise such power by
executive order or in some cases they exercise legislative function
to bring about minor adjustments so that implementation of the Act
may be smoothened. Here in regulation 57 it is an express
language that the Commission may by general or special order itself
do or undertake or direct a generating company to do or undertake
things for the purpose of removing the difficulties. This provision in
the context of an express provision in regulate in 58 giving the
Commission power to amend is not attracted here.
66. In view of the decisions cited in the preceding paragraphs, we find
that this appeal fails to be an appeal under Section 111 of the Act.
The prayer in substance in this appeal has been one to give a
command to the Commission to effect amendment of the regulation
on the ground of alleged defects therein impairing the fulfilment of
the object of the Act which we are unable to subscribe to in as
much as to do so would entail in travelling beyond our jurisdiction.
104
While saying so, we do not say that the Commission at no point of
time can exercise the powers conferred on it under regulation 56,
57, 58 and 59 in appropriate cases.
67. So far as regulation 56 is concerned, it appears that this regulation
is not so wide and generic that the Commission can deviate from
the norms as it would like to in any manner in appropriate case.
Moreover this regulation can be exercised in course of
determination of tariff of a generating company without bringing
about an amendment.
68. Inherent jurisdiction as found in regulation 59.2 and 59.3 cannot
be exercised in legislative domain. We repeat to say that in
course of determination of tariff the Commission may exercise its
inherent power in order to prevent the abuse of the process of the
Commission and to give complete justice in any given matter.
69. If we consider the factualities, we find that the appellant has
questioned the Commission’s wisdom in not considering the
paragraph No. 3.25, 3.26, 3.27, 24, 25 and 26 of the petition No. 8 of
105
2010 reproduced from pages 38 to 43. The essence of the
contentions in the aforesaid paragraphs of the petition No. 8 of 2010
is that ( a) at SGTPS at Birsingpur FY 2009-10 there was partial load
shedding and acute shortage of coal ( b) the units of PH 1 are more
than 15 years old and placed under comprehensive R&M works,(c)
the ABL boilers and BHEL Turbine combination of units have design
deficiency compared to BHEL boiler/BHEL Turbine and the
performance of the two units of SGTTPS is superior to all India
average PUF of ABL boiler/BHEL Turbine sets of 200/210 MW
capacity, (d) as PAFM is linked to DC only zero result would be
achieved because of restrictions on release of water for generation
imposed by WRD, (e) non achievement of PAFM was due to the
provisions in respect of determination of tariff for hydro generating
stations. It is argued that the Commission has not dealt with this
situation.
70. It is important that we should give a look to what the Commission has
said. The Commission’s order is dated 26th May, 2010 impugned
herein. At the outset we are constrained to say that the argument
that the order is not a speaking one has to remain far from being
established. The Commission has noted (i) reasons for poor
106
performance (ii) status of R&M work in all three thermal power
stations (iii) difficulties experienced in respect of the thermal power
stations by the appellant in FY 2009-10 for the reasons recorded by
the appellant (iv) the proposals of the appellant (v) the picture of the
operating norms prescribed for FY 2008-09 in earlier Regulation and
the relaxation being sought by the appellant for new control period at
two different stages station-wise in respect of the items covering
gross station heat rate, specific fuel oil consumption, auxiliary energy
consumption, (vi) appellant’s proposal for relaxation of norms also for
transit and handling losses of hydro power stations on the grounds as
mentioned in seriatim and then (vii)the Commission’s observations
which can be seen at para 33 of this judgment and we restrain from
repeating the same once again.
71. One may in his wisdom agree or disagree with the findings of the
Commission, but it cannot be said that the Commission’s detailed
order is without any reason. The Commission has assigned cogent
reasons for not agreeing to the appellant’s prayer for amendment of
the regulations. We in this Appellate Forum are mandated to hear
appeals under Section 111 of the Act and must not substitute our
107
Jurisdiction to say that the Commission’s order for refusal to effect
amendment was justified. The norms set out in chapter III of the
Regulations are not so impractical, imprudent, absurd, manifestly
wrong and shockingly high and speculative that warrants interference
even if it is considered that this appeal under Section 111 against an
order of the Commission refusing to bring about an amendment is
absolutely justified. Again, to ask the Commission to make
amendment of the regulation would imply: (a) such direction is
possible in law in this appeal presented in the present form (b) the
regulations are not in keeping with the provisions of the Act and (c ) it
is quite permissible for this Tribunal to make such order, which to our
understanding is impermissible for the reasons we have set out
hereinabove. While observing so, we do not observe at the moment
that the Commission is powerless to do so. The Commission has
power to relax or deviate from the norms, but for the purpose of
deviating from the norms, they by virtue of regulation 58 can amend
the norms set out in Regulation 56 so that the norms are brought
down at a level comfortable to the appellant’s power plants. Mr.
Ramachandran has submitted that the norms of operation as laid
down in Regulation 33 are quite unusual inasmuch as they are
108
specific power plants oriented and that is why the appellant made an
application for amendment of Regulation 33. Mr. Sen for the
Commission has submitted that as the appellant company is the
Government Company vested with the function of generation of
electricity and this company has number of power plants, the norms
had to be made different according to the age of the power plant.
The norms for the old generating stations have not been the same for
the new ones and this is for the convenience of the appellant and no
exception or challenge can be made to Regulation 33 of the
Regulations, 2009 only because of certain norms having been made
specific station-oriented. It has been submitted by Mr. Sen that the
Central Electricity Regulatory Commission does not make uniform
norms in the Regulations and they mention specifically the stations
which are not as young as the other ones established in recent times.
Having heard learned counsels for the parties, we do not think that
the Commission’s Regulation 33 can be taken exception to because
of specification of norms station-wise. In this connection, our
attention has again been invited by the learned counsel for the
Commission to the decision of this Tribunal in Neyveli Lignite
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Corporation Ltd. Vs. Tamil Nadu Electricity Board and others ( Appeal
Nos. 114 and 115 of 2005). This Tribunal has held as follows:
“At this stage we may also refer to the submission of Mr. Reddy that Regulation 16(i) (c) of the Regulations applies to the appellant alone and therefore the same cannot be in the nature of subordinate legislation. It needs to be noted that Sub Clauses (a), (b) and (c) of Sub Regulation (i) of Regulation 16 apply to various entities. Regulation 16(i) (c) undoubtedly applies to the appellant alone but this is in view of the special nature of the generating unit established by the appellant. It is well settled that a legislation can be framed for a single unit, entity or a person. The same principle would apply to the framing of subordinate legislation in respect of a single unit or entity or body, provided it can be distinguished from others on the basis of its peculiar or distinctive features. In any event we are bound by the decision of the Supreme Court rendered in the West Bengal Electricity Board case (Supra) as it directly deals with the nature of the Regulations notified by the Regulatory Commission in exercise of its power conferred by Section 58 of the Electricity Regulatory Commissions Act, 1998, a provision similar to sections 68 and 178 of The Electricity Act, 2003. None of the other decisions cited at the bar deal with the Regulations framed under the provisions of the Act of 1998 or the Act of 2003. Accordingly, on the first point we hold that the Regulations framed under Electricity Act 2003, are in the nature of subordinate legislation and on second point we hold that the challenge to their validity falls outside the purview of the Tribunal. Accordingly, the point raised by Mr. Ramachandran has been set at rest so far as this Tribunal is concerned.”
72. It has been submitted by Mr. Sen that it is incorrect to say that the
Commission advised the appellant to file tariff petition incorporating
the difficulties in meeting the norms set out by the Commission, on
the contrary, the appellant on its own filed the MYT petition. Our
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attention has been drawn to the letter dated 08.09.2009 wherein the
Commission communicated to the appellant as follows:
“MPPGCL submitted that the company is facing difficulties in complying with the operational norms notified in the MYT Regulation, 2009. MPPCL requested for a review of benchmark set by the Commission in MYT Regulation, looking to the conditions of machines. The Commission expressed its displeasure and observed that this reason for delay in filing MYPT petition was not convincing. Since the norms under Regulations are notified tariff petition is to be filed accordingly. However, the norms fixed by the Commission are almost similar to the norms fixed by the CERC for the same vintage of power station.”(Emphasis ours)
73.The Commission in its MYT order for FY 2009-10 to FY 2011-12
dated 03.03.2010 has observed that the appellant in its petition
sought for revision in the bench marks/norms specified in the
Regulations, 2009 notified on 8th Mary, 2009 and also filed a tariff
proposal based on the norms proposed by the appellant. The
Commission conveyed to the appellant that since it was only in the
recent past that after a prolonged public hearing norms were set out it
was not possible to revise the norms. Then, the appellant filed a
petition being no. 8 of 2010 specifically praying for relaxation of
norms and in the preceding paragraphs we have found the reasons of
the Commission in rejecting the petition. It is commented by Mr. Sen
that appellant sought revision in norms which were more relaxed than
its previous submission made on 27.02.2009 as comments to the
draft regulation and further the appellant was seeking more relaxed
norms for FY 2009-10, than the norms specified for FY 2008-09 in the
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Regulation for the earlier control period based on which the MYT
order for the control period 2006-07 to2008-09 as also the true up
orders for FY 2006-07 were issued. These submissions are borne by
the record and could not be disputed. The commission’s impugned
order testifies to this position. It has been submitted by Mr. Sen that
the appellant considered the average of the operating parameters
actually achieved since FY 2003-04 when there are instances of the
appellant achieving better operating parameters in between the years
and the approach of the appellant was not in conformity with what the
tariff policy provides for in Section 5.3 which we quote below:
“Suitable performance norms of operations together with
incentives and disincentives would need be evolved along with
appropriate arrangement for sharing the gains of efficient
operations with the consumers. Except for the cases referred
to in para 5.3 (h) (2), the operating parameters in tariff should
be at “Normative levels” only and not at “Lower of normative
and actual”.
The policy further runs thus:
“This is essential to encourage better operating performance. The norms should be efficient, relatable to past performance, capable of achievement and progressively reflecting increased efficiencies and may also take into consideration the latest technological advancements, fuel, vintage of equipments, nature of operations, level of service to the provided to consumers etc.”.
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74. It has further been submitted that the appellant sought relaxation in
operating norms even for the new capacity i.e. SGTPS 500 MW
Birsinhpur unit commissioned on 28.08.2008 although Mr.
Ramachandran claims that such relaxation was not sought for the FY
2010-11 although relaxation was sought for so as to facilitate the
appellant technical personnel to understand and gain experience for
operating such capacity.
75. Our attention has been drawn to the table given by the respondent
no.1 to show how the appellant on 27.02.2009 proposed benchmarks
for FY 2008-09 and onwards in the petition no. 08 of 2010 praying for
relaxation of norms again downgraded the norms. This is why the
Commission observed in para 12 of the order that the appellant
sought relaxation in norm for FY 2009-10 which are even inferior to
the norms for FY 2008-09 prescribed by the Commission in the
Regulations for the earlier control period i.e. FY 2007-09 and the
appellant was seeking inferior norms than what he had in the earlier
years. In these circumstances, we are unable to say that factually
also the Commission’s finding cannot said to be without reason and
that reasons advanced by the Commission on objectivity of facts
should not be substituted by our view, if any.
76. Having thus found out the factual situation we are to observe that any
amount of impression that the Commission was not realistic in its
approach must be dispelled and that it had consistently insisted upon
the appellant to carry out renovation and modernization activities
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which the Commission lamented that the appellant did not seriously
pursue for.
77. We have so far covered all the issues in a comprehensive manner
and summarize our reasons as below:
(a) The appeal is not maintainable in its present form.
(b) To direct the Commission to effect an amendment of the
regulation would entail encroaching upon the power of
Judicial Review which we do not have.
(c) The impugned order of the Commission dated 26th May,
2010 cannot be the subject-matter of challenge in an
appeal under Section 111 of the Electricity Act.
(d) Regulation 57 dealing with power to remove difficulties is
inappropriate and cannot be taken as resort to for
downgrading the benchmarks.
(e) Regulation 56 as it is there in the regulation does not
entitle the Commission to come down from the norms and
it is only when regulation 58 is exercised to amend
regulation 56 that the Commission may in its wisdom
lower down the norms and benchmarks.
(f) Regulations 59.2 and 59.3 of Regulation 59 are
exercisable in adjudicatory process, not in legislative
jurisdiction.
(g) The Commission’s impugned order does not suffer from
lack of reason and objectivity of facts.
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(h) While holding the above, we also hold that it is always
open to the Commission, if they would like, to undertake
any study of norms even after the rejection of the prayer
for amendment so as to consider the feasibility or
otherwise of bringing out an amendment of the
Regulations in course of the determination of the tariff
application. We also hold that within the present
parameters of Regulation 56 the Commission can
deviate from the norms if it so wishes and deems fit. We
also hold that the Commission is at liberty if it would
deem proper to amend Regulation 56 on the strength of
Regulation 58 so as to widen its power to deviate. We
further hold that the Commission in course of
determination of tariff may exercise any of the powers as
is available to it in a suitable situation in their respective
jurisdiction. Since the prayer for amendment has been
refused by a reasoned order, we are not in a position to
say that we must intervene so as to compel the
Commission to pass an amended notified Regulations.
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78. Subject to what we have held in penultimate paragraph, the
appeal fails and is dismissed but without costs.
(Justice P.S. Datta) (Rakesh Nath) Judicial Member Technical Member Dated: 6th May, 2011 Reportable/Non-reportable PK/RKT
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